The Federal Trade Commission on Monday shut down National Consumer Council Inc., citing "misrepresentations and omissions" by the Santa Ana nonprofit credit-repair firm and its for-profit affiliates.
A notice on the locked door at National Consumer's Deere Street office said a federal judge had appointed a financial guardian to take over the firm and affiliates London Financial Group, National Consumer Debt Council, Solidium, J.P. Landis and Financial Rescue Services Inc.
For The Record
Los Angeles Times Wednesday May 05, 2004 Home Edition Main News Part A Page 2 National Desk 1 inches; 51 words Type of Material: Correction
Debt firm -- National Consumer Council Inc., a Santa Ana nonprofit shut down by the Federal Trade Commission on Monday, was incorrectly identified in an article in Tuesday's Business section as a credit-repair firm. The company bills itself as an educational organization that helps consumers negotiate their way out of debt.
The notice said the FTC, in an April 23 lawsuit, "alleged that the companies violated the FTC Act by misrepresentations and omissions and violated other regulations and laws." The notice also said the state Department of Corporations, which regulates financial companies, had issued a desist-and-refrain order against National Consumer.
An officer at the financial guardian, Robb Evans & Associates of Sun Valley, said he was constrained from commenting until the unsealing of the FTC lawsuit, a move expected to take place today.
FTC officials didn't return calls.
Department of Corporations officials said National Consumer and London Financial had operated without a required California license. In all, more than 250 employees of various companies were sent home Monday, said Virginia Jo Dunlap, a supervisor with the state agency.
National Consumer bills itself as an educational organization, advising debt-swamped clients to stop paying creditors, a strategy designed to increase pressure on credit card companies to settle. Instead, clients make payments to National Consumer affiliates, which promise to negotiate with creditors after consumers' saved funds total about 25% of what they owe.
Better Business Bureau of the Southland President Bill Mitchell called National Consumer the largest and most egregious of deceptive debt-relief operations. He said the company collected high upfront fees but often left clients worse off than they started, sometimes in bankruptcy protection -- a statement disputed by a National Consumer spokeswoman.
"This company has settled over 40,000 credit card accounts for its customers and saved them over $100 million," said Nilou Salimpour, an outside publicist for the firm. National Consumer's president, William Harvey, and lawyer, Michael Mallow, couldn't be reached for comment.
Frances Townsend, 77, of Springfield, Mo., said National Consumer's process worked for her after she wound up in the hospital with a broken leg, making it impossible to keep up payments on about $6,000 in credit card debt.
