AmeriDebt announces layoffs, cites 'negative publicity' after fraud accusations

Friday, October 24th 2003, 12:00 am
By: News On 6

GERMANTOWN, Md. (AP) _ Credit-counseling service AmeriDebt, accused of charging millions of dollars in hidden fees while falsely pitching itself as a nonprofit, said it will lay off most workers.

The Germantown-based company also said it will stop seeking new customers because of recent ``negative publicity.''

Illinois sued AmeriDebt in February, alleging of failing to tell consumers about its high initial and monthly fees and of failing to forward customers' payments to creditors. Missouri filed a similar suit last month.

Earlier this month, the Internal Revenue Service and the Federal Trade Commission announced they would investigate nonprofit credit counseling services to make sure they serve consumers and qualify for their tax-exempt status. No specific companies were named.

AmeriDebt said that as of Nov. 1 it will ``cease outreach to new consumer clients in order to focus on serving the counseling and educational needs of its existing clients.''

The company said it was ``releasing most of its current employees'' but did not specify how many.

A call by The Associated Press on Friday wasn't immediately returned.

``For better or for worse, our ability to serve new consumer clients has been compromised by the negative publicity surrounding our organization,'' AmeriDebt counsel Zynda Sellers said in the statement. ``As a result, we believe that the only right thing to do at this point is to focus on the American debtors we already serve.''

On its Web site, AmeriDebt said it has worked with 400,000 people and had more than 90,000 clients as of July.

Annually, an estimated 9 million Americans contact a credit-counseling agency _ often the last resort for consumers before filing bankruptcy.