Government sues debt-settlement firm

Wednesday, May 5th 2004, 11:44 am

By: News On 6

WASHINGTON (AP) _ Federal regulators announced a fraud lawsuit Wednesday against a California-based credit repair company accused of bilking thousands of customers who sought help managing their debt.

The suit by the Federal Trade Commission charged the National Consumer Council with deceptive claims and practices ``that have harmed consumers throughout the country.''

The council, the agency said, made millions of dollars deceiving consumers by enrolling them in debt-negotiating programs that only made their financial situation worse and led many into bankruptcy.

Consumers weren't told that the council often would not begin negotiating debts for six months or longer, and that consumers should still pay their bills, the FTC alleged. It also said the council soaked up hundreds of dollars in fees that weren't always disclosed.

As part of the legal filing, the FTC had the council cease operations on Monday.

Several calls to the Santa Ana-based company were not immediately returned.

Named as defendants in the suit were four affiliated companies: London Financial Group; National Consumer Council, a Nevada corporation; National Consumer Debt Council; and Solidium.

Separately, the FTC cited the council for violations of the government's do-not-call registry. The agency said hundreds of consumers who had placed their phone numbers on the list complained that they still received unwanted phone calls from council telemarketers.

``NCC was calling people they shouldn't have been calling, and claiming things they shouldn't have been claiming,'' Howard Beales, director of the FTC's Bureau of Consumer Protection, said in prepared remarks ahead of the announcement.

``These defendants lied about their nonprofit status and intentionally put consumers in harm's way financially,'' he added.

Consumer groups hailed the commission's lawsuit.

``We applaud the FTC for moving to protect consumers from debt-settlement firms that make wild claims, charge consumers outrageous fees and destroy their credit records by urging them not to pay their bills,'' said Travis Plunkett, legislative director at the Consumer Federation of America. ``We advise Americans to avoid debt-settlement firms that encourage consumers not to pay their bills and charge them fees before any service is performed.''

This is not the first time the FTC has targeted a debt-negotiating firm.

In February, the agency sued Briggs & Baker, based in California, and accused the company of making false and misleading claims to consumers trying to get out of debt.