DALLAS (CN) - Attorney General Greg Abbott sued Debt Relief USA, seeking $4.6 million for clients it allegedly cheated in Texas and other states. Abbott says the company, based in Addison, targeted people in financial trouble and falsely promised it would make them "debt-free in as little as 36 months."
Abbott says that because Debt Relief USA filed for Chapter 11 protection in June, 2,500 financially distressed customers did not receive the relief they were promised.
"Under Debt Relief USA's model, debtors stop paying their debts in order to save the money they would have paid creditors over time," Abbott's office said in a statement. "Instead, they paid monthly installments to Debt Relief USA, which promised to later negotiate discounted payoffs with creditors."
But Abbott says Debt Relief illegally collected "set aside" money from customers as part of its bankruptcy, and that it failed to meet state registration and bond requirements.
State investigators found that the company often failed to contact creditors, which damaged its customers' credit reports and resulted in debt collection lawsuits, late fees, interest, over-limit charges and other fees.
"Therefore, even in the event of a settlement, customers often owed significantly more on their accounts, which reduced their overall debt settlement savings," Abbott's office said.
Texas seeks restitution, attorneys fees and civil penalties of up to $20,000 per violation of the Texas Deceptive Trade Practices Act.
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