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Consumer Debt Counselor Settles FTC No-Call Complaint

A consumer debt counseling firm that was shut down as a result of the Federal Trade Commission's first no-call enforcement action settled the complaint, the FTC said yesterday.

National Consumer Council Inc., Santa Ana, CA, and its affiliated companies are winding down operations, the FTC said. Last year, a judge placed NCC and its affiliates into receivership in response to an FTC complaint that it was falsely promising free debt counseling and violating the national no-call list.

The receiver has returned $24 million to consumers so far from trust accounts held by NCC and its affiliates, the FTC said. Under the settlement, NCC and its affiliates must pay another $1 million for consumer redress.

The principals of the operation, Walter Haines, Paul Kardos and Walter Ledda, must pay $605,000, $1.86 million and $1.36 million, respectively, as part of the settlement. The defendants face a suspended judgment of $84.3 million, which they must pay if they are found to have misrepresented their finances.

According to the FTC, NCC misled consumers by telling them to stop making payments to creditors and make payments to NCC instead. It failed to tell consumers that it would not begin negotiations with creditors for as long as six months after they switched their payments to NCC, resulting in negative marks on their credit reports for nonpayment as well as late fees, garnished wages and increasing debts, the FTC said.

NCC claimed it was a nonprofit to gain exemption from the no-call list, the FTC said. NCC generated leads for its for-profit affiliates, who went on to charge consumers for thousands of dollars in fees.

Few people had their debts reduced as a result of their relationship with NCC, the FTC said. The court-appointed receiver estimated that only 638 of the 44,844 consumers who enrolled in NCC's debt-relief program completed it.

In a separate case, the FTC also announced settlements with Debt Management Foundation Services — which also was charged with violating the no-call list — and Better Budget Financial Services involving the misleading of consumers with offers of debt counseling programs.

Scott Hovanyetz covers telemarketing, production and printing and direct response TV marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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