Bogus ‘Debt Elimination Program’ Fails to Deliver Lower Interest Rates
SEATTLE – The Washington State Attorney General’s Office and the Federal Trade Commission want a federal judge to order Debt Solutions, Inc., to stop charging consumers hundreds of dollars for a bogus “debt elimination program.”
The agencies jointly filed a complaint this month in U.S. District Court in Seattle, seeking civil penalties and injunctions for violations of federal and state consumer protection laws and the national Do Not Call rule.
“This is the second time the Attorney General’s Office has sued Debt Solutions, Inc.,” McKenna said. “The Federal Trade Commission and our office are concerned that the company continues to market its so-called ‘debt elimination’ program to people who can’t afford more debt. Individuals pay hundreds of dollars for the promise of lower interest rates and rarely, if ever, save money.”
Debt Solutions, Inc., based in Boca Raton, Fl., operates a call center in Federal Way. Until last summer, the company also operated a call center in Spokane.
The complaint alleges violations by Debt Solutions, Inc., DSI Financial, Inc., DSI Direct, Inc., and Pacific Consolidation Services, Inc. DSI owner Kenneth Schwartz, Pacific Consolidation Services owner Jennifer Whalen, and company managers David Schwartz and Greg Moses are also named as defendants.
The complaint filed by the FTC and Attorney General’s Office alleges that DSI and its affiliates have marketed what they call a “debt elimination program” since at least 2002 through unsolicited phone calls to consumers nationwide and advertisements on several Internet sites, including www.debt2wealth.com and www.acceleratedfinancialinc.com. Consumers were charged between $399 to $629 for the program.
“There are a variety of legitimate options to reduce debt,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection, “including more realistic budgeting, credit counseling from reputable organizations, debt consolidation programs, and, if need be, filing for bankruptcy. In every case, though, people should be wary of any business that claims it can negotiate substantially lower interest rates on credit cards and loans.”
The complaint includes the following allegations concerning DSI:
- Consumers are falsely told that they will be assigned a financial consultant whose special relationships with creditors will enable them to negotiate substantially lower interest rates. In fact, consumers who purchase the program typically do not have their interest rates lowered at all and, if they do, the reductions are rarely more than one point.
- Consumers are told they will save thousands of dollars and pay off their debts three to five times faster – all without higher monthly payments. But consumers are not told that the promised savings may take decades to achieve, or that most of the savings will result from simply paying more money every month, not from reduced interest rates.
- Consumers are promised a full refund if they do not save at least $2,500, but few have received the guaranteed refund.
- The company fraudulently claims its program is endorsed by the Financial Standards Council in Canada and the Registered Financial Planners Institute of North America.
- The defendants called phone numbers on the Do Not Call Registry and continue to call people who previously asked not to be contacted.
The complaint alleges violations of the Federal Trade Commission Act, the federal Telemarketing Act, Washington’s Consumer Protection Act and the state Commercial Telephone Solicitations Act. It asks that the court grant a temporary restraining order to stop DFI from making further misrepresentations to consumers.
In August 2004, the Attorney General’s Office brought action in Spokane Superior Court against DSI and its affiliates for similar violations, including high-pressure sales tactics and misleading pitches. The parties settled and DSI agreed to pay $250,000 in civil penalties, with all but $25,000 suspended on condition of compliance with the terms.
DSI stopped selling to Washington consumers in response to Washington’s previous lawsuit, but the FTC and the Attorney General’s Office allege that defendants continued to target residents of other states.
The FTC offers a brochure titled “Knee Deep in Debt” with tips on reducing debt. It is available at http://www.ftc.gov/bcp/conline/pubs/credit/kneedeep.htm or by calling 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.
Consumers who purchased products from Debt Solutions, Inc., may file a complaint with the Attorney General’s Office online at www.atg.wa.gov or the FTC at www.ftc.gov. Washington consumers may also call 1-800-551-4636 to request a complaint form.
Copies of the complaint are available from the FTC ’s Web site at www.ftc.gov and the Attorney General’s Web site at atg.wa.gov, or by clicking here.
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Kristin Alexander, Public Information Officer, Attorney General’s Office, (206) 464-6432, firstname.lastname@example.org
Claudia Bourne Farrell, Office of Public Affairs, FTC, 202-326-2181
Frank Dorman, Office of Public Affairs, FTC, 202-326-2674
Jack Zurlini, Assistant Attorney General, (509) 458-3538
Charles Harwood, FTC Regional Director, (206)220-6350