NY Attorney General Wins $200,000 Suit Against Debt Settlement Firm

New York Attorney General Andrew Cuomo Thursday announced that his office has won a lawsuit against a national debt settlement company that bars the company from doing business in the state unless it posts a $500,000 performance bond to protect consumers. The decision also imposes fines and penalties of about $200,000 on the company.

A lawsuit was filed in May alleging that Phoenix-based Nationwide Asset Services, Inc. (NAS) defrauded consumers in New York who were seeking help with their debts. The judge ruled for the state, finding that 1,981 consumers had been victims of fraud.

Cuomo said that the decision was the latest development in his probe into debt settlement and collection industries.

The court found that the majority of NAS customers were promised a 25 to 40 percent reduction in their outstanding debt but never saw such reductions. Only one-third of one percent of consumers received such savings. The other customers suffered continued harassment and lawsuits by creditors and debt collectors and had their credit ratings destroyed.

The court’s decision also orders NAS to compute restitution for 180 consumers who successfully completed the program but actually paid more in fees and settlements than the amount originally due on their debts. NAS has been ordered to compute this consumer restitution and the specific amounts will then be verified by the Attorney General’s Office and the court.

The Attorney General’s investigation and suit determined that NAS and its affiliates, ServiceStar LLP and Universal Debt Reduction, LLC, and its marketer, FGL Clearwater, Inc. d/b/a American Debt Arbitration, based in Florida, engaged in fraudulent and deceptive business practices and false advertising and made significant profits by selling misleading debt settlement plans that very rarely delivered the promised benefits to consumers dealing with debt.

“This company made promises to people who were searching for financial help and trying to turn their lives around,” said Attorney General Cuomo in a statement. “But the promises never came true and, in many cases, New Yorkers were left in worse condition than when they started. Thanks to this ruling, the company has to put its money where its mouth is with a performance bond if it wants to do business in New York.”