CHARLESTON -- West Virgina Attorney General Darrell McGraw on Tuesday announced the recovery of more than $64,000 for 48 state consumers in cases against three debt negotiation and settlement companies that charged illegal fees.
These settlements, worth exactly $64,737.08, bring the total of successful cases brought by McGraw's office against deceptive and abusive practices by debt relief providers to 31 since 2006, and have resulted in refunds of more than $2.1 million to 4,191 West Virginia consumers.
On Tuesday, McGraw's Consumer Protection Division announced compliance and refund agreements with the following companies:
* Discount Debt Solutions Inc., a debt settlement company based in West Palm Beach, Fla., also doing business as Debt Settlement Solutions, with $31,223.80 to be refunded to 28 consumers;
* Accelerated Financial Centers LLC, a debt negotiation company in Port Saint Lucie, Fla., with $7,445 to be awarded to 11 consumers;
* And Heritage Debt Relief LLC, a debt settlement company in Dripping Springs, Texas, with $26,068.28 to be given to nine consumers.
Debt-relief telemarketers have been put on notice by McGraw's office, and other attorneys general, to end what his office calls "one of the worst abuses in the debt relief industry": charging fees before actually providing any debt relief to consumers.
Starting Wednesday, a new Federal Trade Commission regulation bans debt relief companies from charging any fees before there is a written agreement with a creditor to actually reduce, eliminate or otherwise successfully renegotiate a consumer's debts and the consumer has made at least one payment to the creditor under the agreement.
"I am proud of the cutting-edge role that ongoing enforcement by my Consumer Protection Division has played in bringing some fairness to the debt relief industry by working to eliminate deceitful practices and underhanded charges," McGraw said in a statement.
"The Division's tireless advocacy contributed significantly to the FTC's enactment of an important new rule."
The new rule, McGraw explained, was prompted by consumer complaints that the industry charged thousands of dollars in advance and typically refused to make refunds when they failed to deliver any debt relief.
Debt relief companies will now be required to establish "dedicated accounts" to protect consumers' funds and to disclose the truth about costs and the likely negative consequences -- such as downgraded credit ratings and the possibility of lawsuits by creditors -- that can result from using debt relief services.
McGraw said debt relief providers -- including for-profit debt credit counselors, debt settlement firms, debt negotiation services, and companies that falsely claim nonprofit status -- often target consumers in financial distress.
FTC Chairman Jon Leibowitz has called the new regulation "a major victory for consumers struggling to control and manage their debt without inadvertently digging themselves in deeper."