Debt-Reduction Company Settles with FTC

A company claiming to be able to reduce consumer debt is under fire from the Federal Trade Commission-so much so that it is now agreeing to settle charges that it violated federal law.

The final defendant in the case of the United States District Court Vs Debt-Set, Isaac Kahn, settled his charges. The company is accused of falsely claiming that it could reduce the interest rates on consumer credit cards and the amounts of their credit card debts. The FTC claims the company sold debt reduction services via radio and television commercials and web sites, claiming consumer can reduce their debt immediately and stop harassing debt collectors from calling.

The FTC states that when consumers would call a toll-free number in response to the Debt-Set ads, they were told they should join a program to consolidate their debts if they had debt more than 30 days past due and a program to settle debts if their debts were more than 30 days past due.

The FTC accuses the company, including Kahn, of violating federal law by guaranteeing that half or more of the consumers' total debts can be eliminated through settlements and by guaranteeing lower interest rates on unsecured debts. The FTC further accuses Debt-Set of misrepresenting the fact that there would be no up-front fees and that by joining the programs debt collectors would stop calling. Neither proved to be true, according to the FTC.

Kahn, according to the settlement, agreed to stop violating federal laws with regard to this business, including stopping telling consumers that there are no up-front fees if there are fees involved and that the organization can stop debt collectors from calling. He further agrees to not make any guarantees about how much consumer debt can be eliminated through his company's programs.

Kahn faces a potential $1 million judgment against him, if the U.S. District Court finds he misrepresented any of the sworn financial statements.

The FTC claims that debt-reduction companies have the potential to assist consumers with negotiations with creditors when they are behind with their bills but that these organizations need to be up front about all fees and what all is involved. The FTC encourages consumers to make wise decisions about whether they can fix their personal debt issues themselves by keeping in communication with their creditors or whether a debt-reduction company is needed or helpful for them in terms of solving personal finance issues.