May 5, 2004
Contact: NCL Communications Department
First “Do Not Call” Case Announced
FCC goes after phony debt negotiation business for violating do-not-call list
If you’ve received a call from the National Consumer Council (NCC) offering to help you with your debts, you’re not alone. “I’ve received several recorded messages from them, and I don’t even have any debts,” says Susan Grant, coordinator of the Alliance Against Fraud in Telemarketing and Electronic Commerce (the Alliance is coordinated by the National Consumers League, which has no connection with the National Consumer Council). Those calls may stop now that the Federal Trade Commission (FTC) has sued the NCC and related corporations and individuals for allegedly violating consumers’ “do not call” rights and deceiving them about the organization and the services it offers.
According to the FTC, the NCC has been masquerading as a nonprofit organization, promising consumers that it will stop collection agencies from hounding them and negotiate significant reductions in the amounts they owe to their creditors. But the defendants are lying about their nonprofit status, the complaint alleges, and making millions from payments that consumers think are being applied to their debts.
Consumers who respond to NCC’s solicitations are encouraged to enroll in its debt negotiation program. The FTC says that the defendants don’t tell consumers that NCC won’t contact their creditors right away; it may be 6 months or longer before NCC starts to negotiate with their creditors. Meanwhile, the creditors’ collection activities don’t stop – in fact, they often become more aggressive because nothing is being done to deal with the debts. Consumers’ accounts may become delinquent, late fees and other penalties may accrue, creditors may sue and garnish consumers’ wages, and the interest rates may be increased because no one is making minimum monthly payments on the accounts – and none of this information is disclosed, according to the FTC.
The FTC also alleges that when the NCC has negotiated reduced debt amounts for consumers, it hasn’t told them that they may be liable for federal or state taxes on the amount that the debts were reduced by, and that a negative notation, “settled for less than full amount,” may appear on their credit reports.
Consumers in NCC’s debt negotiation program make monthly payments to trust accounts, believing that the funds will be distributed to their creditors. However, the FTC says that NCC applies hundreds of dollars from those payments toward its fees, often without disclosing this to consumers. In fact, no money is disbursed to the creditors until NCC’s fees are paid in full. As a result, the consumers’ debts actually increase, instead of decreasing.
NCC is also accused of calling consumers whose numbers are in the national “do not call” registry and continuing to call people even after they asked not to be called again. Nonprofits aren’t covered by the “do not call” requirements, but if the NCC isn’t really a nonprofit organization, as the FTC claims, it must comply with them. This is the first case the FTC has brought alleging violations involving the national “do not call” registry.
Concerns about bogus credit counseling services have risen in the past few years as new organizations have sprung up offering to assist debt-ridden Americans deal with their creditors (see Focus on Fraud, Volume 12, Number 3, Fall 2002). An FTC publication, “Fiscal Fitness: Choosing a Credit Counselor,” offers good advice for consumers who are worried about their financial situations and need help. It describes the differences between credit counseling, debt management plans, and debt negotiation programs, and also tells consumers what questions to ask and how to check out service to make sure it’s legitimate. In addition, there are tips for how to spot rip-offs.
For more information on the NCC case and links to this and other educational materials from the FTC, go www.ftc.gov/opa/2004/05/ncc.htm.
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