By Kenneth Long on July 29, 2010

Rogue debt relief companies advertising through robocalls may no longer charge high upfront fees. That is the result of a Federal Trade Commission ruling that goes into effect October 27, 2010.

At issue is the practice of debt relief companies using auto dialers to contact thousands of people each day in order to push their financial products. The vast majority are debt settlement companies who prey on vulnerable debtors who are desperate to get help with their delinquent debt accounts.

What is happening is consumers are getting collection calls from their credit card and loan companies when they are unable to keep up with their payments. Then they get a call from someone who promises to help, only their promises include deceptive and false claims that cannot be substantiated.

Debt settlement company clients pay in hundreds and thousands of dollars in upfront fees. They first start to worry when the collection calls increase rather than decrease. Then when they get their first court summons, they realize that it was all a big mistake.

They have paid all of their money into these debt relief scams, and now they have no money to use toward the debt collector that is taking them to court. They face the shame of a judgment, the derogatory record on their credit reports and the resulting liens, wage garnishments and levies that can be initiated through a judgment.

This ruling by the FTC does not prevent the charging of high upfront fees by debt settlement companies. What it does is to ban this practice of front-loading fees if the client is sourced through a robocall. Additionally, clients who call in response to other advertising would also be protected under the Telemarketing Sales Rule.

The ruling does not apply to nonprofit organizations that have tax-exempt charity status. Of course, true charities focus more on fostering referrals and providing financial education for public benefit than on commercial advertising.

Debt settlement companies will have to choose their next step. Some will choose to defy the order and will have to be forced to shut down. Some will shift their tactics to other carpet-bombing advertising tactics, such as through direct mail or sending spam email, although they would still be subject to the limitations if clients call in to sign up. Others will likely shut down due to the inability to raise large amounts of upfront revenues without actually having to provide a service.

Since the entire debt settlement industry regularly breaks deceptive advertising laws, any impact will likely be the result of regulatory lawsuits on a per-company basis. That is something that we have already seen, with Attorneys General from New York, Texas and West Virginia leading the charge.

Consumers who do need debt help should ignore the false claims made by debt settlement companies. Instead, they should follow the advice of regulators and the Better Business Bureau by seeking help with a nonprofit credit counseling organization with a solid rating.

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Note: Apparently the October deadline was too late for one state. Attorney General Bill McCollum barred Credit Solutions of America, one of the leading debt settlement companies, from enrolling new Florida clients using an advance fee model. This injunction is a result of a lawsuit initially filed by the state of Florida in October 2009. American Debt Arbitration and Nationwide Asset Services, Inc. were also barred from charging unlawful fees in violation of Florida's Deceptive and Unfair Trade Practices Act.

By Kenneth Long on July 22, 2010

The Mossler Law Firm of Carmel, Indiana has been slapped by the Vermont Attorney General for multiple infractions. While they claim to settle their clients debt, they found they needed to settle their own civil violations with the state of Vermont.


Mossler Law Firm had a very aggressive fee structure. It charged between 8-10% of the debt balance, monthly maintenance fees of $30-100 a month and an additional fee of 33% of the "savings." On a $20,000 plan, a debtor would pay Mossler at least $5,980 and up to $10,100 in fees to settle the debt for $10,000. This calculation does not include additional interest charges that would continue to accrue at the rate of 12% (state maximum in Vermont for collection agencies prior to judgment), nor does it include the additional income tax liability that clients likely would have to pay on forgiven debt.

Mossler Engaged in Unfair and Deceptive Trade Practices

Mossler Law Firm was found to have violated the Vermont Consumer Fraud Act. Their business practices were deemed to be unfair and deceptive. Mossler did not include a disclosure in its contract giving the right to cancel the agreement. They failed to make payments to creditors once every 30 days as required by state law. Additionally, their fees for service grossly exceeded the $50 initial setup fee cap and 10% of creditor payments.

Based on the violations cited by the Attorney General, it appears that any debt settlement plan may be in violation of state law. The law noted in the release by the state of Vermont is 8 V.S.A. § 4870a. According to Vermont statutes, "Licensees shall make payments to creditors in a timely manner at least once every 30 days in accordance with the contract between the licensee and the debtor." Since debt settlement plans normally hold funds well beyond 30 days, they would also likely be in violation of state law.

If you live in Vermont and are considering doing business with a debt settlement company, you should first contact the office of the Attorney General to inquire whether the firm is licensed by the state. Of course, you should also note their Better Business Bureau rating which can provide information regarding their reliability.

Vermont clients will receive a letter indicating that Mossler Law Firm will pay an additional $2,000 over and above all reimbursements if they were sued by creditors while enrolled in the plan. For more information on the Mossler settlement with the state of Vermont, see the Assurance of Discontinuance that completed the settlement.

By Kenneth Long on July 1, 2010

The massive Auto Relief Group scam is finally busted. Auto Relief Group LLC advertised heavily on both the internet and television in 2009 and early 2010. By June 2010, this massive scam was shut down by regulators.

Jeffrey Taylor, Director of Sales of Auto Relief Group provided the following quote in a press release on January 29, 2010:

“Auto Relief Group provides you with the hands on help in restructuring your loan. ARG will work with your current lender, acting as a trusted third party and a valuable "buffer" between parties involved. Since ARG works on "success" basis, our interest is entirely aligned with yours. If we cannot help you negotiate acceptable terms for your loan, we don't feel like we have earned our fee and you owe us nothing”

As soon as I saw the first commercial, I knew immediately that the company was making false claims. Any company that claims they can lower your car payment without refinancing the loan is making false representations. For the average consumer, the scam is less obvious.

Daniel Stermer was appointed Receiver of the now defunct company. He is charged with seizing the remaining assets of the company and returning whatever funds remain to the customers that were defrauded.

For those who sent in money to Auto Relief Group, it is likely that most of your money will never be seen again. The company vacated its leased office space after being unable to pay the $30,000 monthly rent. If you should receive any refund, understand that it would only be a partial refund, would likely take at least a year to issue and would have to follow the claims process established by the Receiver.

For information on the claims process, you may contact the Receiver Daniel Stermer at 1-877-842-7667. The Receiver initially seized the website in order to provide updates on attempts to seize the company's assets so that refunds could be made. Once the Receiver completes the dissolution of the business, you can expect that any money that you paid into the scam that was not refunded is lost forever.

What Else Can You Do?

If you are having trouble with your car payment, there are some viable options. First, you need to make sure that you continue making your regular car payment to your lender. If you missed any payments or are in danger of missing a payment, it is necessary to keep your lender informed. Some lenders may order repossession right away if you miss a payment and do not stay in contact with the lender.

Understand that lenders do not want the car back. They want you to fulfill your obligation to repay the loan as agreed. If you are having a hardship, see if there is any direct assistance available by the lender. They might provide a temporary reprieve for a month if you can justify your circumstances and prove that you can afford the long-term payments.

Realistically though, your best shot at improving the terms of your loan is to refinance the car with another lender. This can be an option if your credit is better and the loan balance is smaller than when you first bought the car.

If you are in worse shape as most of Auto Relief Group's customers are, then you have little options other than trying to improve your budget so that you can afford your payments. Most importantly, make sure that you don't repeat your mistake of buying more car than you can afford and financing it with a high-interest loan.

Customers of Auto Relief Group are encouraged to comment on their experiences.