Abbott settles with bankrupt debt relief firm

By Keith Loria | Dec 3, 2010


DALLAS (Legal Newsline) - Texas Attorney General Greg Abbott announced on Friday that he has obtained a court order against a now-bankrupt debt relief firm to release $3.7 million in client funds that were allegedly fraudulently obtained.

Defunct Debt Relief USA Inc., allegedly collected millions of dollars from Texans illegally by misrepresenting that they would settle their outstanding debts.

The company allegedly collected "set-aside" funds that customers believed would be used to resolve their personal debts, but because the company went into bankruptcy in July 2009, more than 3,000 of its financially distressed customers could not access this money.

It is alleged that the company's bankruptcy resulted in thousands of customers' financial problems increasing because the customers received no real financial assistance and were pursued by debt collection agencies while their money was held up.

The suit alleged that Debt Relief USA customers were charged late fees, interest, over-limit charges and other fees by their original creditors because they could not afford to make payments on their outstanding accounts.

Under terms of the agreement, an additional $1 million will most likley become available when the bankruptcy case concludes.

Based on Debt Relief's records, each customer's eligibility, as well as the amount of refund they are owed, has already been determined.

Debt Relief USA also allegedly failed to comply with the legally mandated registration and bond requirements imposed upon "debt management services providers," and assessed burdensome "administration fees" and monthly "maintenance fees" that worsened its customers' financial situations.

Once a company successfully settled a debt, it is alleged that Debt Relief USA charged a "negotiation fee" of 13 percent of the amount of debt saved.

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