After one postponement, the FTC will issue its mystery “announcement” tomorrow morning, in conjunction with attorneys general from 11 states. Although the FTC has not disclosed the subject matter, speculation is that it may involve enforcement actions against more debt repair service providers. The FTC has brought actions against many debt repair service providers over the last year.
FTC crackdown on debt repair service providers is imminent
The most recent filing by the Federal Trade Commission against a debt repair service provider came last week in Florida against Student Debt Doctor, LLC. The Complaint is posted here. The FTC obtained an asset freeze, which is a tool commonly used by the FTC to make it difficult for defendants to obtain legal counsel and to defend themselves. A stipulated preliminary injunction has now been entered, and a receiver has been appointed.
It’s time for debt repair service providers to seek legal help
Whoever is being targeted by the FTC should plan accordingly. In many instances, it is not advisable to stipulate to a preliminary injunction or TRO. Additionally, the FTC occasionally seeks to freeze assets that were obtained beyond the time period that the FTC is allowed to go after. The appointment of a receiver creates further risk that the Federal Trade Commission will work improperly with the receiver rather than pursuant to the rules of civil procedure. If a business has had the foresight to obtain “FTC insurance” it needs to make a claim immediately.
There are many more immediate steps that must be taken if a business receives an inquiry from, or suspects it may be under investigation by, the FTC. Once the FTC has filed suit, there is very little time to protect the business’s ability to defend itself. We are watching for tomorrow’s announcement with great interest.