Debt Settlement Companies Defeat Case Brought By FTC
Debt settlement companies, for a fee, negotiate discounted settlements with a consumer's creditors after the consumer has saved enough money in a special purpose account to fund each settlement. These companies typically advertise that, through their programs, consumers can save 30 to 60 percent of their credit card and other unsecured debt. Upon completion of the program, usually in 36 months or less, the consumer will be debt free, they say.
The FTC alleged that the savings and timing advertising claims of three of these companies – Financial Freedom Processing, Inc., Debt Consultants of America, Inc., and Debt Professionals of America, Inc. – violated the Federal Trade Commission Act and sought more than $58 million dollars in restitution.
Now, however, U.S. District Judge David C. Godbey of the Northern District of Texas has rejected the FTC’s argument against the three Dallas-based companies and delivered a verdict in their favor. Judge Godbey found that the companies’ claims "were true for a majority of the customers of the Companies who completed the program."
Bob Wise, of the Dallas law firm Lillard Wise Szygenda PLLC and the companies' lead trial attorney, was pleased by Judge Godbey's decision, pointing out that "the FTC failed to prove its case. To the contrary, as Judge Godbey found, the companies and their officers and directors used their best efforts to comply with the law and acted in good faith at all times."
Corey Butcher, a founder and CEO of Financial Freedom of America, a subsidiary of Financial Freedom Processing, said, "Even though the FTC had no evidence of wrongdoing, the collateral damage from this meritless prosecution is huge: 300 employees lost their jobs, hundreds of thousands of dollars in revenue was lost, and thousands of consumers overwhelmed by debt were deprived of a viable option to bankruptcy. This is a gross example of over-reaching by a runaway government agency that has nearly derailed an entire industry."
Butcher continued, "Debt settlement companies fill a critical need that no one else is providing. Consumers need help in learning how to manage their spending and save money. When credit card companies raise interest rates on debt to 28 or 30 percent, consumers get caught in a vortex they can't escape. Debt settlement companies help educate consumers and give them an opportunity to avoid bankruptcy and get their lives back on track." Butcher concluded, "There was a lot at stake, and we're thankful that justice prevailed in this case."
Financial Freedom Processing is the Dallas-based parent company for FFA as well as for Debt Consultants of America and Debt Professionals of America. The Dallas-based companies say that they have helped thousands of clients settle more than 30,000 accounts, and eliminated more than $150 million in unsecured debt.