and NBC News
updated 3/30/2005 4:19:19 PM ET 2005-03-30T21:19:19

The Federal Trade Commission Wednesday announced settlements with three businesses that took more than $100 million from consumers by falsely promising easy debt relief when actually their offerings made the problems worse.

In some cases consumers' debt, interest rates and penalties increased, and some consumers were forced into bankruptcy, the agency said.

The three companies and their principals have agreed to pay $6 million in restitution with an additional $124 million in penalties ordered but suspended, according to an FTC statement. A court-appointed receiver also recovered $24 million from one of the businesses.

One of the most egregious violators was National Consumer Council, which the FTC described as a front group for companies that scammed nearly 45,000 customers who sought debt relief.

These companies, operating under names like National Consumer Debt Council, London Financial Group and Financial Rescue Services, charged customers "thousands of dollars" in enrollment fees by falsely claiming they would eliminate consumer debts and halt collection efforts, the FTC said. In fact only 638 customers, fewer than 2 percent, were able to complete the debt-negotiation programs set up by the companies.

The FTC also charged that the enterprise violated federal telemarketing regulations by calling consumers who had put their phone numbers on the national Do Not Call Registry and claiming that it was a non-profit organization exempt from the law.

Better Budget Financial Services, another company, falsely claimed it could reduce consumer debt by 50 to 70 percent and shorten the time period necessary to pay off debt in exchange for a monthly fee of $30 to $40 plus 25 percent of any debt saved through negotiation with a creditor.

According to the FTC’s complaint, the company advised consumers to stop paying their creditors and save their money in an ordinary bank account from which Better Budget Financial withdrew its monthly fee.

The FTC charged that few consumers had all their debts settled by the defendants. In fact, consumers’ debts increased due to the imposition of late fees and penalties onto their accounts. "Many consumers were sued by their creditors and many were forced to file for bankruptcy," the FTC said in a news release.

A third entity, Debt Management Foundation Services, claimed to be a non-profit corporation and said it could reduce consumers' debt by 50 percent. The company deceived consumers into paying up-front fees as high as $1,000 and monthly fees of $20 to $49, the FTC said.

The company and related entities including Debt Specialist of America Inc. and Credit Counseling Specialists of America Inc. are being liquidated by a court-appointed receiver.

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