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A credit counseling agency and related companies have agreed to settle Federal Trade Commission charges that they deceptively marketed themselves as a not-for-profit enterprise to entice financially distressed consumers to enroll in debt management plans, and then failed to deliver on promises of personalized credit counseling and dramatic and immediate interest rate reductions.

Under proposed settlements, Lighthouse Credit Foundation Inc. and its co-defendants will pay more than $2.4 million in consumer redress, and they are prohibited from making deceptive claims about credit counseling or debt management services.

According to the FTC’s complaint, defendant Integrated Credit Solutions, Inc. solicited consumers for Lighthouse’s debt management plans by leaving prerecorded messages on home answering machines stating that the consumer had been approved through “a certified non-profit nationwide program” to consolidate credit card debt before the next billing cycle at interest rates “as low as 1.5%.” People who responded to the messages were told that the program included counseling on how to manage finances, and that a monthly administrative fee was tax-deductible because Lighthouse was a nonprofit organization. Consumers agreed to pay large fees to enroll in debt management plans based on these representations, the complaint alleges.

The FTC’s complaint alleges that the defendants neither provided the promised interest rate reductions nor lowered interest rates before the consumers’ next billing cycle, noting that it typically takes three to four billing cycles before interest rates can be reduced under a debt management plan. Consumers were not provided with financial counseling, and the monthly administrative fee was not tax-deductible, the FTC alleged. According to the FTC’s complaint, Lighthouse acted as part of a for-profit enterprise with its co-defendants to generate substantial revenue from the fees paid by consumers.

The proposed settlements prohibit the companies and their principals, Mary M. Melcer and J. Steven McWhorter, from making misrepresentations about credit counseling or debt management services, including non-profit or tax-exempt status, financial counseling, interest rate reductions, and the deductibility of fees. The defendants must honor cancellation, refund, and termination requests from consumers, and follow certain recordkeeping and reporting requirements to assist the FTC in monitoring their compliance. In addition to the defendants’ payment of $2,371,380 in consumer redress, the corporate defendants will set aside $415,000 to refund the enrollment fees of consumers who complete their debt management plans.

The FTC’s complaint alleges that Jeffrey E. Poorman and Daniel M. Melgar, Sr., without participating in the alleged deception, received proceeds of the illegal conduct as shareholder distributions from co-defendant Flagship Capital Services Corporation, Integrated’s parent company. Poorman has settled with the FTC, agreeing to pay $105,000. The FTC is proceeding with its claims against Melgar. The FTC acknowledges the valuable assistance of the Attorneys General in California, Florida, Massachusetts, and Vermont, who settled claims against Lighthouse, Integrated, and/or Flagship in 2004 and 2005.

The Commission vote to file the complaint and settlements in this matter was 5-0. They were filed in the U.S. District Court for the Middle District of Florida, Tampa Division, on May 2, 2006.

NOTE: A stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated final judgments have the force of law when signed by the judge.

Consumer Education and Outreach

The FTC has issued many consumer education publications related to credit counseling, including “Fiscal Fitness: Choosing a Credit Counselor”. To address the credit counseling and debtor education requirement in the new bankruptcy law, the FTC and the United States Trustee Program (USTP) of the U.S. Department of Justice have issued a joint consumer advisory: “Before You File for Personal Bankruptcy: Information About Credit Counseling and Debtor Education”.

The FTC and the USTP are working together to ensure that consumers have access to the full library of FTC publications addressing credit issues. The FTC’s “Consumer Credit Briefcase” has the agency's consumer information about debt and bankruptcy, credit reports, home mortgages, credit cards, and loans on a CD that will be available within the month from the FTC, as well as from USTP-approved credit counseling agencies, financial institutions, bankruptcy attorneys, attorneys general, local consumer protection offices, and the U.S. Department of Agriculture’s Cooperative Extension Service.

As part of their outreach efforts on credit counseling, debt management, and filing for bankruptcy, the FTC and the USTP also are asking print, broadcast, and online advertising executives to screen advertisements for false claims that a credit counseling agency is approved by the USTP to offer pre-bankruptcy credit counseling.

Copies the complaints 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 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 The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. 032-3244)

Contact Information

Media Contact:

Claudia Bourne Farrell
Office of Public Affairs

Frank Dorman
Office of Public Affairs

Staff Contact:

Alice Saker Hrdy
Bureau of Consumer Protection

Benjamin K. Olson
Bureau of Consumer Protection