CARROLLTON, Ga. (CN) – Phoenix-based Financial Freedom Southwest, a so-called “debt adjuster,” defrauds people of thousands of dollars in fees, without providing the “almost magical” services it promises, a woman claims in a class action.
Cynthia Snyder sued Financial Freedom Southwest and its founder and owner, Malcolm Giles, of Scottsdale, Ariz., in Carroll County Superior Court.
Snyder, who owed more than $55,000 to 15 credit card companies, claims that of the $14,969 she paid to Financial Freedom, it took $4,349 for itself.
[The fees come to 29 percent of Snyder’s payments. The complaint erroneously calculates the fees as 41 percent: $4,349 of the $10,620 that Snyder says Financial Freedom did distribute to her creditors.]
In her complaint, Snyder says she found Financial Freedom Southwest through the Internet as she was struggling to pay her debts. She claims the defendants target” Georgia’s most financially desperate individuals struggling under the crushing weight of what appears to be insurmountable consumer debt. Looking for a miracle, or at least an alternative to avoid the stigma of bankruptcy, these Georgia citizens are most vulnerable to defendants’ siren song of virtually instant relief.”
The complaint adds: “Defendants go so far as to claim ‘something almost magical about [their] simple approach’ which ‘will obtain better results than [the debtor] could ever obtain on [their] own.'” (Brackets in complaint, with reference to an exhibit.)
Snyder says Financial Freedom and Giles claim “that through their many years of experience, their connections in the credit industry and their financial savvy, defendants can dramatically lower the client’s bills and get the client out of debt much faster than any other service can provide, and for as little as 40 cents on the dollar of the debt actually owed.”
Actually, according to the complaint, the defendants did not settle for 40 cents on the dollar but took almost 30 cents of every dollar she paid on her debts.
Over 36 months, Snyder says, she paid more than $14,000 for a set-up fee, an enrollment fee, a monthly membership fee, and a monthly “set aside” fee.
“From March 2002 to August 2006, defendants collected $14,969.00 from plaintiff and retained $4,349 of this amount in debt adjusting fees,” the complaint states. “Of the monies defendants collected, only $10,620 of said funds were distributed to plaintiff’s creditors, thus representing a 40.95 percent fee.”
From 1956 to 2003, Georgia’s Debt Adjustment Act made it a misdemeanor for companies such Financial Freedom to engage in “debt adjusting,” but in 2003 the Georgia General Assembly amended the Act, allowing debt-adjustment companies to do business in the state so long as they provided insurance coverage, self audits conducted by CPAs on debtors’ accounts, and a trust account for debtors’ funds, according to the complaint.
“The amended Act thus removed the out-and-out prohibition on debt adjusting for a fee and cracked the door to allow debt adjusters to operate in Georgia as long as the Act’s mandates are followed,” the complaint states.
Snyder says Financial Freedom violated Georgia law by charging her and the class more than 7.5 percent of their debts in fees.
In addition, “Defendants fraudulently induced the plaintiff and plaintiff class members to pay for debt settlement services with no intent or possibility of actually resolving their debts in the manner represented by defendants,” the complaint states.
Snyder seeks class damages and an injunction.
Her lead counsel is James Hurt Jr. with Hurt Stolz & Cromwell, of Athens, Ga.