Debt Relief Websites: Are they Honest?

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Aaron Kelly

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Serving Scottsdale, AZ

Owner & Attorney at firm Kelly / Warner, PLLC

Serving Scottsdale, AZ

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Debt Relief Websites: Are they Honest?

On Oct. 13, 2011, the Federal Trade Commission’s Motion for a Preliminary Injunction against Christopher Mallett’s string of websites promising relief from debt, including tax and mortgage liability, was granted by a federal judge. Ultimately, this will result in removing all of his debt relief websites from the Internet. Christopher Mallet, owner of numerous websites, violated the Federal Trade Commission Act by alluding that the websites and the companies advertised on the sites are affiliated with the federal government. He used the FTC seal plus deceptive language to mislead the public in believing that his websites and those affiliated with them were federally connected.

Additionally, when a consumer would ask for information by leaving their contact information on Mallett’s website, a third party would often call on them to pitch a debt relief package.

Judge Kollar-Kotley’s Opinion

Although U.S. District Judge Colleen Kollar-Kotley stated that the “FTC made an uncontested showing that Mallett’s websites and the organizations advertised on those websites falsely represented their association with the federal government,” and they “adequately supported their motion,” she “pauses to observe that the findings are merely preliminary.” In other words, further litigation will be required to determine whether the representations made on the websites would mislead reasonable consumers, because, as she states in her 15-page opinion, “it is a factual question.”

Two Adjustments Ordered In Favor of Mallett

Judge Kollar-Kotley did loosen the tight deadlines set forth by the FTC for Mallett and third parties to comply with the order.

She also warned the FTC that the request to record all calls between them and Mallett should follow the rule of law in the jurisdiction in which it occurs.

Results of the Preliminary Injunction

Unfortunately, while waiting for future court hearings on the final determination of this case, Mr. Mallet will be paying a high price.
The preliminary injunction signed by the judge will:
1. Forbid Mallett from further falsifying his representation of debt relief;
2. Remove all of his debt relief websites from the Internet;
3. Preserve all evidence relevant to the prosecution; and
4. Obtain from Mallett an accounting of his present financial status.

The FTC is watching  

With cases such as these, the courts and the FTC are making it clear to other companies that consider compromising the truth in order to make money at the debtor’s expense that they are not only taking notice, they are taking action. Pulling the plug on dishonest company websites and implementing more rules concerning them will most likely set precedence for future offenders, unless the final verdict for Mallett is favorable.

Current FTC Rules for Debt Relief Websites

According to the FTC, the latest rules of procedure for debt relief websites concerning consumers are as follows:
The for-profit debt relief companies may only charge fees:
? After a written agreement between the consumer and the creditor is signed;
? The debt is reduced, renegotiated, or settled; and
?

After the consumer makes a payment to the creditor after the debt is reduced, renegotiated, or settled.
There is an additional set of rules for telemarketing firms selling debt consolidation.

Public Complaints

According to the FTC, there were 2,600 complaints lodged against debt relief companies in 2010. Consumers paid up-front fees only to find out that their debt was not reduced, as promised. Some debt relief companies have even taken the last of the consumer’s money, pushing them further into debt, even bankruptcy.

Following the Rules

Thankfully, debt relief is available to the consumer today. However, the primary concern for the consumer is to make sure the company they choose is following the Federal Trade Commission’s rules.

As stated above, before any money changes hands, the debt should be reduced, renegotiated, or settled. In addition, signing a contract providing proof that the creditor is paid is a wise move for the consumer.

Future Rulings

This matter concerning the shutdown of numerous debt relief websites is significant. Eliminating dishonest companies that deceive the consumer makes it easier to search for help with debt relief. No one should have to worry about false promises or claims or to be misled with false advertising.

At the same time, if the question as to whether a reasonable consumer would be misled by Mr. Mallett’s advertising is not clear, as the present status of this case suggests, one can only wonder what the final verdict will be so it will be wise to hire an experienced affiliate marketing lawyer.

The FTC comes down on debt relief agencies, who’s next? 

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