Fraudulent Debt Negotiators Settle FTC Charges

For Release

A group of defendants promising negotiation services that would “drastically” reduce consumers’ debts have settled Federal Trade Commission charges that their deceptive claims violated federal law and harmed consumers who engaged the defendants’ services and stopped contacting creditors. The defendants are barred from advertising or participating in any debt negotiation business in the future.

In February 2004, the FTC filed charges against Todd A. Baker; another individual, who settled with the Commission in February 2004; and two companies they owned or controlled, Innovative Systems Technology, Inc., which did business as Briggs & Baker; and Debt Resolution Specialists, Inc. (DRS). The FTC alleged that, since 1999, the defendants falsely claimed that they could substantially reduce consumers’ debts. According to the FTC, consumers who responded to the defendants’ radio and Internet ads were told that Briggs & Baker and DRS would negotiate with consumers’ creditors and settle their debts for a fraction of the amount owed. The FTC alleged that, once consumers signed up for these programs, Briggs & Baker and DRS told consumers to end all contact with their creditors and stop making payments on those accounts.

The FTC’s complaint charged that the defendants did not negotiate with consumers’ creditors to reduce or eliminate consumers’ debts as advertised, and that consumers who stopped communicating with their creditors found themselves deeper in debt, sometimes forced to pay additional charges and incur further damage to their credit ratings.

The two stipulated final orders announced today resolve the FTC’s charges against all remaining defendants in this matter. The first order, against Baker and DRS, permanently bars them from advertising or selling any debt negotiation services in the future. Baker is currently a debtor in a Chapter 7 bankruptcy case. The Baker-DRS order stipulates that the FTC will hold a general unsecured claim in Baker’s bankruptcy case of $8,959,860, the total estimated amount of consumer injury in this case, and can participate in any distribution on that claim. It also contains standard recordkeeping and reporting requirements to assist the FTC in monitoring compliance. The second stipulated final order prohibits Innovative Systems Technology – already shuttered in another Chapter 7 bankruptcy case – from conducting any further business whatsoever. Both orders bar the defendants from selling any lists of customer data.

The Commission vote to authorize staff to file the stipulated final order was 4-0. The stipulated final order for permanent injunction was filed in the U.S. District Court for the Central District of California on July 13, 2005.

NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the stipulated final orders are available from the FTC’s Web site at http://www.ftc.govand also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov . The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. 032-3006)
(Civ. No. CV 04-0728 GAF (JTLx))

Contact Information

Media Contact:

Jen Schwartzman
Office of Public Affairs
202-326-2674

Staff Contact:
Kenneth H. Abbe or Barbara Chun
FTC Western Region - Los Angeles
310-824-4343