The Federal Trade Commission recent put a halt on the operations of the bankrupt credit card relief company Debt Relief USA Inc., which has been accused of charging fees and promising to lower debts for consumers, but failing to do so and in many cases increasing those debts.

According to the Commission's complaint, the company made deceptive promises to consumers, saying it would be able to eliminate between 40 to 60 percent of credit card debt within two to four years. The company also allegedly charged fees before settling or reducing credit card or other unsecured debt, in violation of Federal Trade Commission telemarketing sales rules.

The ceasing of operations came in conjunction with a proposed settlement which would have had the company pay out a $19.7 million judgment against two company principals. That judgment, however, was suspended because of the principals' inability to pay, although sources said it may be reinstated should evidence be found that inaccurate financial information was provided to the Federal Trade Commission. The two principals were also ordered to cease marketing financial products and services. Two other principals of the company are still embroiled in litigation.

The Commission's proposed settlement reportedly does not contain any measures for monetary relief of consumers, as the Texas attorney general's office already provided consumer's relief through the company's bankruptcy proceeding. Through that process, consumers were paid a total of $3.7 million, in addition to any further distributions.

There is no doubt that consumers should be wary of which companies they get involved with when seeking debt relief. It isn't a bad idea to consult a knowledgeable attorney to learn of the options and potential pitfalls of seeking debt relief.

Source: Wall Street Journal, "FTC Halts Credit-Card Debt Relief Business," Tess Stynes, August 23, 2011.