Two Years After Addison-Based Debt Relief USA Went Bankrupt, the Feds Take an Interest

Categories: The Courts
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No doubt you heard the radio spots in which they promised to "settle your credit card debt for pennies on the dollar without filing for bankruptcy"; no doubt you saw the TV ads in which they claimed you would "truly be debt free in less than 36 months." From 2005 till '09, Addison-based Debt Relief USA's commercials were ubiquitous. They were also full of shit. Customers, and there were many, shouted: Rip-off! Frauds! They said: The company took what little money they had left -- under the guise of "administrative fees," "monthly maintenance fees" and "negotiation fees" -- and pocketed the dough, in exchange for ... nothing left. Nothing at all.

And then it got worse: On June 18, 2009, Addison-based Debt Relief USA filed for Chapter 11 in United States Bankruptcy Court for the Northern District of Texas downtown; less than a week later, it was converted to Chapter 7. The Texas Attorney General got involved and said in December 2010 that a deal had been struck, that it has "obtained a court order disbursing $3.7 million to Texans and customers in other states who were defrauded by a now bankrupt debt relief firm." No word on whether anyone's yet seen a penny of that.

But now comes the Federal Trade Commission, which yesterday in federal court in Dallas filed its own suit against Debt Relief USA and its officers: Kelly Reilly, Alvin Bell, James Wojick and Valerie Leath. The complaint spells out how their scam worked, beginning with the promise that they had "special relationships with creditors" and "could negotiate significant discounts for consumers." But they didn't. And they couldn't. So the feds allege they violated Section 5 of FTC Act, the one concerned with unfair or deceptive acts or practices. And they want their pound of flesh. FTC v Debt Relief USA

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18 comments
consumer10onlineorg
consumer10onlineorg

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debt consolidation
debt consolidation

Under normal circumstances the whole process, start to clean up your debt, it is better to get professional advice. Thanks for sharing.

debt consolidation
debt consolidation

Hello..The information you shared in the post is very informative for me as I was not aware of it. I am glad I visited here and come to know about it. I will share it with my friends.

Allen Smith
Allen Smith

I believe that filing for bankruptcy would be a much better and safer idea rather than going for a debt settlement or a debt consolidation program if one is going through a hard financial time. Though a debt settlement or a debt consolidation program is not a bad idea to get rid of your debt but it may be only helpful for those who have better financial condition compared to the others. And filing for bankruptcy is quite risk free too.

Steve
Steve

More often than not, these companies are started by former mortgage guys who personafied the stereotypical lower-tier scum of that industry.   That well dried up, and every one of them who I knew from that era got into this industry.

To quote David Faber:  "This is truly bottom-feeder stuff."

Casual Observer
Casual Observer

This couldn't happen to a nicer bunch of people!   One can only wonder why it took so long for any Federal agency to do anything about this.  Maybe government isn't as big and over-staffed as some would lead us to believe. 

MushMouth1
MushMouth1

When are they going to hold the radio and television stations accountable too?  When they accept these ads which everyone knows are scams they are just as guilty in my mind.  Same goes for on-air talent who endorse these products and services.

Relieved
Relieved

Couldn't they sue all debt relief companies then? None of them actually relieve you of anything. Chapter 7 bankruptcy is your only relief if you have credit card bills you can no longer negotiate with the card companies yourself or can not pay at all. I am living proof of it.

Dr. Burlough
Dr. Burlough

Three years after they went out of business,  three years after everybody scattered,  the FTC makes much that they've filed a CIVIL action.  Civil action means,  you have to promise you won't do it again,  the FTC will get a judgment you have to pay something back.  Those 'pay something back' are the federal version of Dallas County bail bonds.  Cold day in Hell.   If I was them,  I'd be ashamed to let somebody know I was this inept.

Montemalone
Montemalone

Another Texas Business Miracle Success Story!

GoDucks
GoDucks

Relieved,I worked with a not-for-profit debt relief service when I ignorantly overextended myself during and directly after college.  They did indeed work with my creditors to lower or suspend my interest rates, and eliminate late or overlimit fees.  They debt relief company allowed me to pay one monthly payment to them, and they in turn paid my creditors.  Within a few years, I was debt-free, and very happy to have worked with them.  So while you may not have had the best experience, it is possible to find debt relief companies that can legitimately help you get back on track, without the need to file for bankruptcy.

Grumpy Demo
Grumpy Demo

Three years ago who was running the FTC? Hint: first letter is "W".

It probably took the Obama FTC 18 months just to perform a investigation before they could file.

Remember these were the same people that at the SEC ignored written letters documenting Madoff's ponzi scheme for years. It's called the GOP "business friendly" low reg environment.

Grumpy Grump
Grumpy Grump

Fisher  at the Dallas Federal Reserve released specific numbers on Texas economic growth. I wonder if this will ever get mention in the Observer other than in this-a-here comment.

Grumpy Demo
Grumpy Demo

Sir!You will be hearing from my solicitor on the charges of misappropriation of snark, copy cat right violations, and just because, . . .

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