I have been asked by so many victims of debt settlement company to help them find refunds that I have lost count. In a few cases, I have been able to direct them to the trustee responsible for paying partial refunds. Most clients are not that fortunate.
Debt settlement companies have been a much maligned industry over the past decade. They rose in popularity as many clients lacked the funds to make even the reduced monthly payments available through credit counseling.
As a result of new regulatory protections for consumers and increased legal action against rogue debt settlement firms, many settlement companies have closed their doors. The client deposits that were supposed to be held in trust have likely been spent long ago, often on expensive lawyers fighting to keep the firm open or otherwise skimmed off by company owners who cashed out at your expense.
The client funds are likely gone with no chance of refund. You have no recourse other than to file a civil suit against the firm and its owners. Of course, even if you win, there is little hope of actually collecting on your award.
A few clients were fortunate enough to ratchet up the heat on their settlement company prior to its dissolution. Many used complaints through the Better Business Bureau, the Federal Trade Commission and their state’s attorney general.
For clients of firms that were broken up by regulators, they are essentially receiving a share of the remaining assets of the company. Bank accounts are seized while the assets of the firm are sold. Some illicit profits skimmed by the owners may be returned during this process also, but even these funds are usually spent or hidden from regulators.
One example was the Allegro Law debt settlement scam. Officials were able to seize $12 million when they shut the firm down, resulting in partial refunds averaging $800 per client. Most clients spent several thousand dollars in fees, so the awards didn’t even come close to paying the interest on their defaulted debts while they were hoping for a settlement.
Considering the lack of success by other clients, your fees are likely gone. Still, it is worth the effort to pursue it, since the amount you already paid is likely a high sum. For help, contact your attorney general to see if there are any actions currently against the company. File a complaint so that you are on the record, as most attorneys general act once they notice an unusual pattern of several complaints against a single firm.
