FTC Charges Marketers of ‘Debt Meltdown Program’ with Allegedly Failing to Deliver Promised Debt Reduction Services

The Federal Trade Commission today charged four companies and their principals, Miriam and Robert Lovinger, with deceptively marketing a “debt settlement” operation that allegedly failed to provide services it claimed would reduce consumers’ debt, resulting in even more debt for many consumers. The FTC has requested an expedited hearing for a temporary restraining order.

According to the FTC’s complaint, since at least 2000 the defendants have sold debt settlement services through the Web sites idebthelp.com, moneycares.com, edgesolutions.com, and ontrackmpower.com, offering a “Debt Meltdown Program” they describe as “an aggressive method of helping consumers out of the debt trap and away from the bankruptcy path.” They claim they will negotiate with creditors to enable consumers “to escape debt at a fraction of the total amount they owe,” that consumers end up repaying only “60 cents for every dollar that is owed,” and that “we can reduce your unsecured debt by up to 60 percent and sometimes more and have you debt free in 18 to 30 months.”

The complaint alleges that consumers who call the defendants’ toll-free number are told that the defendants will obtain settlements that will substantially reduce their debt. The defendants allegedly promise to negotiate with creditors and begin making payments to them within several weeks after consumers join their program, and to provide personalized financial counseling. As noted in the complaint, consumers allegedly are told to set up a direct debit from their checking account for deposit into a bank account established by the defendants, who will debit their fees and pay creditors. They also are told to have no further contact with their creditors, and to stop paying them immediately, enabling the defendants to negotiate for them.

The defendants allegedly often fail to contact each creditor as promised, and consumers often continue hearing from creditors about their debts. According to the complaint, in someinstances the defendants fail to negotiate settlements with all of consumers’ creditors and don’t pay them, resulting in wage garnishment or debt collection agency action. When consumers tell the defendants that they have received a creditor’s summons, they allegedly are told not to worry, that it is just a “scare tactic.” In some instances, the complaint states, creditors sue these consumers, who have to pay the cost of the creditors’ litigation.