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More actions against unlicensed Debt Settlement firms

December 14, 2010

More actions against unlicensed Debt Settlement firms

For Immediate Release:  Tuesday, December 14, 2010

Minnesota Department of Commerce Adds to Series of Actions Against Unlicensed Debt Settlement Firms
Companies Accused of Deceptive Practices and Charging Excessive Fees

(ST. PAUL, MN) The Minnesota Department of Commerce is continuing to crack down on unlicensed debt settlement companies using deceptive practices to market their services and charging excessive fees to Minnesota consumers.  Today, the department announced it has taken action against two Florida-based debt settlement firms for alleged violations of state law.

According to the department, Financial Independence and Resource Education Inc. (FIRE) of Tequesta, Fla. entered into a contract with a Minnesota resident in January 2010 through which the company would contact all of the resident's creditors and negotiate and settle outstanding debts.  The contract allegedly overstated the total debt the resident owed, resulting in higher monthly payments deducted from the resident's bank account under FIRE's program.  The resident stated multiple attempts were made to contact FIRE and correct the debt amount on the contract, but the company continued to charge her the inflated monthly amount.  Unable to rectify the matter, the resident switched banks and requested that FIRE cancel her participation in the program and offer her a full refund.  The company sent the resident a letter, advising her that a refund was not warranted.  The department issued a cease and desist order against the company and accused FIRE of making false, deceptive or misleading statement about the rates, terms or conditions of its debt settlement services plan and of charging excessive fees.

The department has also issued a cease and desist order against Consumer Law Group of Boca Raton, Fla. and its owner Michael Metzner.  After an investigation, the department alleged that the company offered its services to a Minnesota resident as a faster way for the resident to pay off her credit cards.  The resident told the department that $657.57 was withdrawn from her bank account as part of an "enrollment process."  An additional $525.57 was withdrawn from her account beginning in April 2010 and continuing every month until August.  The resident claimed to have later discovered that Consumer Law Group did not contact a creditor as promised, resulting in collection agency activity against her account.  The department has accused Consumer Law Group and Metzner of making false, deceptive or misleading statement about the rates, terms or conditions of its debt settlement services plan and of charging excessive fees.

In addition to the cease and desist orders, the department also will seek civil penalties. Prehearing conferences on both matters will be held on Thursday, January 27, 2011 at the Office of Administrative Hearings in St. Paul.

The recent actions are similar to several others taken by the department against debt settlement companies in recent months.  In October, the department ordered One Source Management to pay a $20,000 civil penalty for conducting unlicensed debt servicing activity in Minnesota and charging consumers a fee of nearly $1,000 for services not rendered.  The fine followed a cease and desist order issued to One Source by the department over the spring.

In September, Capital Debt Relief of Florida settled with the department after the department accused the company of failing to register to operate as a debt settlement services provider in the state, creating consumer confusion over its services and charging fees in excess of what is allowable by law.  According to the settlement, also known as a consent order, the company voluntarily agreed to reimburse consumers all fees in excess of what is allowable by law.  The consent order also ordered the company to submit a report detailing the reimbursement of fees and to pay a $20,000 civil penalty to the state as well as $5,000 for investigative costs.

In August, the department entered into a consent order with Strategic Debt Solutions of Maryland, fining the company $1,000 for failing to register in Minnesota and ordering it to stop engaging in any further debt settlement activities in the state until properly licensed.

In May, Freedom Fidelity Management of California settled with the department and was ordered to pay a civil penalty of $20,000 and to stop engaging in debt settlement services in Minnesota until properly licensed.  The department accused the company of allegedly failing to register to do business in Minnesota, making misleading statements about the rates and terms or conditions of its services and charging fees in excess of those allowed by law.

Consumers with complaints or questions may call the Minnesota Department of Commerce at (651) 296-2488 or toll free, 800-657-3602.

  • Check with the Minnesota Department of Commerce to see if a Debt Services Company is licensed.

  • Choose an agency that offers free face-to-face services to discuss your specific program. 

  • If possible, avoid signing up for a debt services plan over the phone or the Internet as it may put you at risk for losing money to a fraudulent enterprise.

  • Get any and all debt service agreements in writing and read the agreements before you sign them.

  • Avoid companies that require high up-front fees, "voluntary contributions" or high monthly service fees that only add to your debt.

  • Keep in mind, debt service agencies are only allowed to charge fees that are statutorily allowed under Minnesota law.

  • If you are dealing with a debt management company, make sure you are kept informed about when and how much of your monthly payment is going to your creditors.

  • Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short time span (most legitimate debt reduction plans take two to four years to repay) or promises to reverse a bad credit score.

  • Know that there are several free, reputable loan counseling services out there.

About the Minnesota Department of Commerce
The Minnesota Department of Commerce licenses and regulates debt settlement companies, collection agencies and individuals and companies in several other industries.