FTC Wins $5.7M From Debt-Relief Scammers

August 27, 2013

U.S. District Judge James S. Gwin in Ohio has ordered several debt counseling firms to pay $5.7 million to consumers for allegedly using scripted telemarketers to lure people into signing debt-consolidation contracts that the companies did not fulfill.

The U.S. Federal Trade Commission accused defendants Dan Michaels and James Benhaim of operating a series of related businesses in the United States and Canada. Gwin found that the defendants' business practices violated the Federal Trade Commission Act, the Telemarketing Sales Rule, and the Mortgage Assistance Relief Services Rule.

Telemarketers from the companies would falsely tell consumers that they were calling from a current lender's wholesale department, that they had special relationships with the consumer's creditors when they really did not, or that consumers could save hundreds of dollars a month. Often consumers would be convinced to pay thousands of dollars in upfront fees, receiving little or no services in return. The judge also said that the companies would instruct consumers to stop paying their monthly bills while the company negotiated their debt settlements. The defendants were found to have misrepresented the total costs and characteristics of their services as well as the amount of money that consumers would save.

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