Florida Judge Issues Temporary Injunction to Halt Debt Relief Operation

Consumer Finance Debt Relief Enforcement FTC

On May 25, at the request of the FTC and the State of Florida, a Southern District of Florida court issued a preliminary injunction order temporarily halting a debt relief operation that bilked millions of dollars from financially strapped consumers. According to the complaint filed by the FTC and the State of Florida, the Defendants—who operated the debt relief operation—allegedly violated the FTC Act, the FTC’s Telemarketing Sales Rule (TSR), and the Florida Deceptive and Unfair Trade Practices Act by claiming they would enroll consumers in loan forgiveness or payment reduction programs to pay, settle, or obtain dismissals of their debts and improve their credit. (See FTC v. Marcus, No. 0:17-cv-60907-CMA (S.D. Fla. May 8, 2017).) Consumers were often promised attractive interest rates and significantly lower monthly payments. However, consumers, after paying hundreds or thousands of dollars a month for promised debt-consolidation services, discovered their debts were unpaid, their accounts had defaulted, and their credit scores damaged. Several were sued by their creditors, and some were forced into bankruptcy. The FTC and the State of Florida further allege that the Defendants “falsely claimed non-profit status to appear more credible and legitimate.” The complaint further alleges that Defendants called consumers already enrolled with debt-relief providers to inform them that they were taking over the servicing of those accounts and would provide the same or similar debt relief services. Contrary to the Defendants’ promises, consumers ended up in worse financial positions.

In its preliminary injunction order, the court determined that there was good cause to believe that “immediate and irreparable harm” would result unless an injunction was issued. The order prohibits the defendants, in connection with the advertising, marketing, promotion or sale of any good or service, including any debt-relief product or service or credit product or service, from making misrepresentations about debt-relief programs or services and violating any provision of the TSR. The court also ordered a freeze of the Defendants’ assets, imposed financial reporting requirements, and appointed a temporary receiver. In a press release issued by the FTC, the Agency claims it seeks to “permanently stop the alleged illegal practices and obtain refunds for affected consumers.”