Debt Settlement Scam

Legal Expert
Sarah Edwards, BS

Sarah Edwards is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Before enrolling in a debt settlement program, make sure it’s legit. Illegitimate debt settlement companies can cost you thousands of dollars and destroy your credit. SoloSettle is a trusted service that can help you settle a debt for good on your own—no scams involved.

Scams are everywhere these days. Whether you end up on a robocall list or receive unwanted, fishy-looking emails, there is no end to the lengths scammers will go to to get between you and your pocketbook.

Unfortunately, scammers often use debt settlement and relief to target those in dire financial straits. They prey on a consumer’s vulnerability, trying to convince them they can repair their credit, eliminate their debt, or reduce their credit card balance.

Let’s consider a debt settlement scam example.

Example: Suzy Q is drowning in debt. She owes $10,000 to her creditors, but she’s lost her job, so she can’t make payments. Suzy Q sees an ad for Get Rid of Creditors, a company that claims it can eliminate all debts. She contacts the company and provides her information. It tells her she’ll be free of debt if she pays $1,000 for its services. Suzy Q agrees. Get Rid of Creditors takes her money and disappears.

The example shows how debt relief companies can scam people struggling with their finances.

The Federal Trade Commission (FTC) oversees consumer protections for financial services like debt settlement. It investigates potential violators of federal laws concerning financial services and takes action against them.

The FTC publishes a list of scam companies and the actions it has taken against them. To understand these scams, look at these recent debt settlement and debt relief violations. But first, let’s discover why SoloSettle is a great option for debt settlement.

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Now, without further ado, let’s consider some examples of debt settlement scams and red flags to look out for when signing up for a debt settlement program.

BoostMyScore LLC promised customers it would repair their credit scores but used illegal techniques

BoostMyScore LLC came under fire in 2022 for its credit repair scheme. The company told clients they could boost credit scores by filing false reports with the credit reporting agencies. It sometimes even filed fake identity theft reports to remove negative items from its clients’ credit reports.

Some of BoostMyScore LLC’s more egregious activities included encouraging consumers to invest their COVID-19 checks toward the company’s services and offering clients a business opportunity to start their own credit repair services.

As a result of the FTC’s investigation, federal courts shut down the company and froze the owner’s assets. The court will liquidate the assets to compensate former customers.

ACRO Services promised to eliminate or substantially reduce credit card debts

Another recent debt settlement scam involved ACRO Services, which also operated under other names, including American Consumer Rights Organization and Consumer Protection Resources.

The FTC alleged that ACRO Services used illegal and deceptive practices to encourage consumers to sign up for its services. For instance, it employed telemarketers to call consumers and claim they were associated with banks or credit card companies. The telemarketers promised to reduce or eliminate consumer debt within a year.

In its complaint, the FTC also alleges that ACRO charged clients an upfront fee for services, which directly violates a 2010 FTC regulation requiring debt relief companies to settle a debt before charging any fees. ACRO claimed that the enrollment fee would go toward eliminating the balance of the consumer’s outstanding obligations.

While the outcome of the FTC’s debt settlement scam case is still ongoing, federal courts required the company to stop all operations immediately.

Are you facing a debt lawsuit? Settle your debt with your creditor with the help of SoloSettle.

Federal Direct Group defrauds student loan borrowers with upfront fees

The Federal Direct Group, which also did business as Mission Hills Federal and The Student Loan Group, promised clients student loan forgiveness and significantly reduced payments. Following an FTC investigation that found numerous violations, federal courts shut down the company.

The company undertook a few illegal actions, including charging thousands of dollars in upfront fees and obtaining its clients’ student loan log-in credentials. It used the credentials to change consumers’ contact information, which made it challenging for lenders to reach their clients.

Federal courts barred the Federal Direct Group and its owners from operating in the telemarketing or debt relief business. They also implemented a $27.6 million judgment against the company’s owners.

AmeriDebt used deceptive practices with its customers

AmeriDebt was a popular debt relief service in the 2000s that took advantage of customers. It didn’t properly inform customers of fees, which were often significantly higher than customers expected.

Company agents also misrepresented AmeriDebt as a nonprofit organization. The FTC found that AmeriDebt promised to educate consumers on proper financial management skills, which AmeriDebt failed to do.

Clients of AmeriDebt received refunds for payments made to the company. Many also received small damage awards. As a result of the FTC’s investigation, federal courts shut down AmeriDebt and liquidated the owner’s assets.

Manhattan Beach Venture took advantage of student loan borrowers

In a 2019 investigation, the FTC found that Manhattan Beach Venture used deceptive practices to convince clients it could obtain student loan relief or forgiveness. The company charged upfront fees as high as $1,400 for its services and told clients the costs would go toward paying off their student loan debt.

However, Manhattan Beach Venture used the money to connect consumers with a high-interest loan with a third party, Equitable Acceptance Corporation.

Following the FTC’s investigation, federal courts shut down the company and seized its assets. The owners can no longer engage in activities involving debt relief or student loans.

ITMedia Solutions LLC steals personal consumer data and sells it to marketing companies

ITMedia Solutions created hundreds of websites to collect consumers’ personal information, including Social Security numbers and bank account details. The websites promised to connect users with financial service organizations, such as credit card and loan companies.

In a complaint, the FTC alleged ITMedia Solutions sold the data it collected to third-party marketing companies with no concern over how others used it. As a result of the FTC’s lawsuit, ITMedia Solutions paid $1.5 million in civil penalties. Federal courts barred the company from continuing to operate.

Be cautious about debt settlement scams

Be careful when sharing financial details with companies that overpromise. While some companies might help you manage your debt, you need to do your research first.

Don’t send money to any company before thoroughly reviewing its terms and conditions, and make sure the organization has full accreditation with the Better Business Bureau. It’s also wise to check the company’s reviews and complaints.

SoloSettle makes it easy to settle your debt, once and for all.

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