Authorities say the company told its clients to stop sending money directly to their creditors.Î¾ Instead, they paid monthly installments to Debt Relief USA, which set the money aside, and promised to use it to negotiate discounted payoffs.Î¾
Tom Kelly with the AG's office says there was one big problem with that strategy — the company didn't post the bonds required to create a so-called 'set aside fund'.
"They had absolutely no business engaging that activity, so they broke the law there, and we believe we can convince the court they did that."
And Kelley says the company never used the money in the set-aside fund to actually pay off any creditors, leaving their customers worse off than before.
"Because they were assessed penalties and interestÎ¾ and late charges and over-the-credit limit by the creditors.Î¾ Of course, the creditors had every right to pursue that, because they weren't being satisfied by Debt Relief USA in any way."
Kelley says a trustee has been appointed to liquidate the assets of the bankrupt company, so that the clients can get at least some of their money back.Î¾ In addition, the state is seeking civil damages for violating the Texas Deceptive Trade Practices act, along with attorneys' fees.Î¾Î¾ Debt Relief USA has not commented on these legal moves, except to ask visitors to its home page not to contact the company for any information.