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The Federal Trade Commission has filed a complaint in federal court charging that a national organization that promotes itself as a non-profit credit counseling agency is engaged in deceptive practices. According to the FTC’s complaint, the defendants have misrepresented that they charge no up-front fee for their services, that they operate as a non-profit, and that they teach consumers how to handle their finances. Additionally, the FTC charges that the organization failed to provide privacy notices to consumers as required by the Gramm-Leach-Bliley (GLB) Act. Separately, a service provider for the defendants has agreed to settle FTC charges regarding its role in the operation. The FTC also has reissued two updated consumer alerts on credit counseling.

The FTC’s complaint charges Maryland-based AmeriDebt, Inc.; DebtWorks, Inc.; and Andris Pukke; and also names Pamela Pukke (a/k/a Pamela Shuster) as a relief defendant. AmeriDebt has widely advertised its credit-counseling services on a national basis. DebtWorks serviced consumer accounts on behalf of AmeriDebt until the end of 2002. Andris Pukke currently owns and was chairman and CEO of DebtWorks, and was instrumental in founding AmeriDebt.

According to the Commission’s complaint, the defendants claim that AmeriDebt is a non-profit organization dedicated to assisting consumers with their personal finances. The FTC alleges that AmeriDebt does not operate for charitable purposes, but rather to make money for affiliated for-profit companies and individuals, including DebtWorks and Andris Pukke. In addition, the complaint alleges that the defendants do not teach consumers about their finances or how to handle debt in the future, despite claiming that they do. Rather, the defendants enroll all of their clients in “debt management plans” (DMPs). In a DMP, the client makes a single consolidated monthly payment to the defendants for all of their unsecured debts included in the plan, which the defendants then disburse to the creditors.

The FTC’s complaint further alleges that the defendants charge an up-front fee to consumers enrolling in a DMP, despite claims to the contrary in their advertising. The defendants allegedly urge consumers to make an initial payment to enroll formally in the program. Rather than disbursing that payment to creditors, the FTC alleges, AmeriDebt keeps it as its fee. Although the contract with consumers refers to this payment, it is described as“ voluntary” and is inconsistent with the earlier claims that there are no up-front fees.

The FTC further alleges that the defendants violated the GLB Act by failing to provide consumers with the required privacy notices regarding the collection, disclosure, and protection of consumers’ nonpublic personal information.

“We will not allow consumers to be duped into ‘contributing’ hundreds of dollars to these so-called ‘non-profits,’” said Howard Beales, director of the FTC’s Bureau of Consumer Protection. “There was nothing voluntary and nothing charitable about these payments. Consumers’ money didn’t go to creditors, it just ended up lining the pockets of the defendants.”

The FTC’s complaint asks that the court permanently enjoin the defendants from misrepresenting their fees, services, or non-profit status; require that the defendants disclose that they retain the consumer’s first payment; and order the defendants to provide privacy notices to consumers. The complaint also asks that the court award consumer redress.

In a related matter, defendants Ballenger Group, LLC, and its parent, Ballenger Holdings, LLC, have agreed to settle FTC charges regarding Ballenger Group’s role in the AmeriDebt operation. According to the FTC, Ballenger has acted as the servicer for AmeriDebt’s DMPs since the beginning of this year. In a separate complaint, the FTC alleges that Ballenger was closely associated with the other defendants and that it repeated some of AmeriDebt’s misrepresentations in direct statements to consumers on the telephone. In particular, it misrepresented that AmeriDebt is a non-profit entity and failed to disclose that the first payment is retained by AmeriDebt as a fee, according to the FTC. The settlement enjoins Ballenger from misrepresenting that there are no fees; that no profits are being made from the goods or services provided; and that money paid by a consumer on a DMP will be disbursed to creditors. The settlement further orders the defendants to pay $750,000 in consumer redress and contains standard recordkeeping provisions to assist the FTC in monitoring their compliance.

The FTC has published valuable consumer education material to assist consumers seeking credit counseling. The two publications reissued today – “Knee Deep in Debt” and “Fiscal Fitness: Choosing a Credit Counselor."

In addition to the FTC’s action, the attorney general of Minnesota and the Attorney General of Texas are filing suit against AmeriDebt and related parties today. Earlier this year, the attorneys general of Illinois and Missouri filed suits against AmeriDebt. That litigation is ongoing.

This case was brought with the invaluable assistance of the Better Business Bureau of Metropolitan Washington. The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Maryland on November 19, 2003. The Commission vote to approve the Ballenger Group settlement was 5-0. The complaint and settlement were filed in the U.S. District Court for the District of Maryland on November 19, 2003.

Consumers may call the AmeriDebt case hotline at 1-877-862-0886.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

The stipulated final order for Ballenger Group is for settlement purposes only and does not constitute an admission by the defendant 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 Commission’s complaints and settlement are available from the FTC’s Web site at and 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, 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 . 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.

Contact Information

Media Contact:

Jennifer Schwartzman
Office of Public Affairs
202-326-2674 or

Staff Contact:

Joel Winston
Division of Financial Practices

Civ. Nos. not available at press time.
FTC File No. 0223171