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Debtors found no relief in dealing with Debt Relief USA, Inc.

Posted: September 02, 2011

Buffalo, NY -- Debt Relief USA Inc., a financial services firm that promised customers it could settle or reduce credit card and other unsecured debt and did not deliver on that promise, was recently closed by the Federal Trade Commission (FTC). The firm had been investigated by the Texas attorney general’s office and had filed bankruptcy, leaving approximately 3,000 customers nationwide further in debt to their original creditors, and without access to the funds they had paid to Debt Relief USA.

“This is a classic example of debt relief companies defrauding consumers. They claim to be able to negotiate reduced payments on credit card debt, have the customer stop paying on their debts and send the money to the debt relief firm instead. While they wait to accumulate enough money to negotiate with a creditor, (which may or may not be successful), the debtor falls further behind.” said Jeffrey Freedman, senior partner, Jeffrey Freedman Attorneys at Law, a firm that has handled bankruptcy cases for more than 30 years.

So-called debt relief companies actually leave consumers in worse financial shape because while the company is “negotiating reduced payments,” creditors are continuing to charge interest, over-limit fees, late fees on the account, and filing lawsuits; all further destroying the customer’s credit rating and increasing the amount owed. In the case of Debt Relief USA, the company also charged administration and monthly maintenance fees, and when it did settle a debt, it charged a 13 percent negotiation fee.

“Unfortunately, there are more companies out there following this business model,” Freedman said. “And many reach customers nationwide through advertising and 800 numbers. The fact is, if your creditors are willing to negotiate a settlement or a reduced payment plan, they will work directly with you, the debtor. You don’t need an intermediary -- especially one that asks you to pay in advance.”

According to the FTC, Debt Relief USA, Inc. and its principals claimed they could reduce their customers’ debt by 40 to 60 percent and have the customer out of debt within 24 to 48 months. In a settlement with the Texas attorney general’s office, the company’s customers have been awarded $3.7 million in refunds. Last year, the FTC enforced new regulations regarding telemarketing sales stating that debt relief services cannot charge fees before they settle or reduce a consumer’s credit card or other unsecured debt.

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