Federal Judge Closes Debt Relief Operation After FTC Fraud Claims

A federal court has ordered the shutdown of a debt relief company after the FTC accused it of posing as banks, credit card issuers and government agencies to deceive seniors and veterans.

In the U.S. District Court for the District of Arizona, a default judgment of $106.8 million barred Accelerated Debt Settlement Inc., ADS Resolve LLC, Financial Solutions Group LLC, Unified Capital Services LLC, Mediwerks, Resolution Specialists LLC, Futura Capital and several individual defendants from operating in the debt relief business.

Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said the conduct was especially troubling because it allegedly targeted seniors and veterans by pretending to be institutions they trust. He added that the agency would continue pursuing impersonation and unlawful debt relief schemes.

The court had previously issued a temporary shutdown order against the Accelerated Debt Settlement enterprise after the FTC said the defendants falsely claimed to be banks and government officials and promised to cut consumers’ debts by 75% or more. The FTC also alleged that they reached consumers through telemarketing and by responding to direct-mail and online ads, and that they illegally collected advance fees.

The judgment also prohibits the defendants from:

• Advertising or promoting any debt relief product or service.
• Engaging in telemarketing.
• Impersonating any government entity or person, or violating the Impersonation Rule.
• Using a consumer credit report without a permitted purpose.
• Making misrepresentations, including about any material term of a cancellation, exchange or repurchase policy; the expertise or role of any person offering a product or service; the ability to improve or affect a consumer’s credit record, credit history or credit rating; or claims that a consumer will save money.

Earlier this year, the court entered stipulated orders with three individual defendants: Jeffrey Lakes, Robert Knechtel and Alizabeth Reany. Those orders impose the same restrictions as the corporate defendants and require the individuals to surrender assets.

Lakes faces a $104.3 million judgment, jointly and severally with the other defendants, though part of it will be suspended if he turns over assets worth about $12.6 million. Knechtel’s roughly $37.3 million judgment will be suspended because of an inability to pay. Reany must transfer $175,000 or give up the title to her Scottsdale, Arizona home.

Funds collected from the individual defendants will be made available to compensate consumers who were allegedly defrauded.