Texas Attorney General Cracks Down on Debt Settlement Companies
Sometimes, the promises are just too good to be true. That was the case with some of the claims
made by four debt settlement companies. Texas Attorney General Greg Abbott has charged BC Credit Solution, LLC,
LH Financial Service, Four Peaks Financial Services, and DebtORSolution with
orchestrating fraudulent debt settlement schemes, according to TV station KTRE..
The first two companies are based in Dallas, Texas, the
third in Scottsdale, Ariz., and the last in Louisville, Kent., and Abbott
alleges that all four have unlawfully misrepresented and overstated the nature
of the services they are able to provide to customers.
“At a time of economic hardship, these defendants are
charged with orchestrating unlawful debt reduction schemes,” Abbott said. “Today’s enforcement action cites four
defendants for materially misrepresenting the nature of their services and
misleading customers about the protections they are guaranteed by Texas law.”
Among the misleading statements found on the companies’ web
sites:
BC Credit solution reported that “Chapter 13 bankruptcy
forces you to pay back the full balance plus any interest that you
accrued.” In reality, Chapter 13 allows
debtors to reduce the amount they must pay back to unsecured creditors.
FH Financial and DebtORSolution stated that Chapter 7
bankruptcies will lead to the auction of a debtor’s property, including cars
and homes. In fact, Chapter 7 bankruptcy allows debtors to keep exempt property, which commonly includes the primary
residence.
Four Peaks Financial stated that bankruptcy ruins an
individual’s credit, while debt settlement allows their credit score to
improve. This is by no means always the
case.
According to Texas’ enforcement action, the defendants did
not clearly disclose the material claims of their programs, including the
potential negative effects that include increased risk of lawsuits, decreased
credit scores, increased collection efforts, and other interest and fees. All four companies misrepresented the time
frame in which a customer could complete a debt resolution program. In fact, such a time frame is impossible to
guarantee due to the unique circumstances of each case. The state is seeking restitution harmed by
the companies’ allegedly unlawful business practices, including civil penalties
up to $20,000 per violation of the Texas Deceptive Trade Practices Act.
Several of the companies are accused of misrepresenting
their affiliation or positive standing with the Better Business Bureau, and
one, Four Peaks, is accused of exposing its consumers’ personal information on
its web site. That would violate Texas’
Identity Theft Enforcement and Protection Act, and expose the company to
penalties from $2,000 to $50,000 per violation.
In fact, three of the companies have been rated by the
Better Business Bureau. FH Financial and
Four Peaks Financial have both received an “F” grade from the BBB, while
DebtORSolution received a “C-.”
While not all debt settlement companies engage in illegal
practices, the action of Attorney General Abbott underscores the need for any
debtor to carefully research all of their options and make sure they know the
history and reputation of any company before entering into any agreement.