FTC Challenges Bogus Debt Negotiation Service

The Federal Trade Commission has charged two debt negotiation companies and their principals with violating federal law. Defendants Innovative Systems Technology, Inc. (doing business as Briggs & Baker), Debt Resolution Specialists, Inc., Todd A. Baker, and Jack Briggs (aka John Briggs) claimed they could “drastically” reduce consumers’ debt by negotiating directly with creditors. The FTC charges that the defendants’ radio advertisements and Internet Web sites were false and misleading and that the defendants were unable to negotiate substantial reductions in the amount consumers owed. The FTC further alleges that, as the result of purchasing defendants’ debt negotiation services, consumers’ credit ratings suffered, their total debt increased, and that some consumers even became the target of legal action.

The FTC’s complaint against the California-based defendants states that, under the direction of Todd Baker and Jack Briggs, Briggs & Baker advertised debt negotiation services to consumers since at least 1999. Briggs & Baker’s radio and Internet ads allegedly claimed that the company could negotiate with consumers’ creditors, which would enable consumers to pay off their debts for a fraction of the amount originally owed. The FTC alleges that, after consumers signed up for the service, Briggs & Baker directed them to stop making payments to all of their unsecured creditors and that Briggs & Baker would prevent further contact from their creditors. Briggs & Baker purported that its services were risk-free and guaranteed.

The FTC’s complaint states that many of Briggs & Baker’s claims were false, that Briggs & Baker usually was unable to negotiate any substantial reductions, and that consumers’ failure to make payments or respond to creditors’ payment demands – as per Briggs & Baker’s instructions – typically resulted in increased debt, additional charges, and damage to consumers’ credit reports. The FTC charges that, in some cases, Briggs & Baker did not even contact consumers’ creditors to negotiate a settlement. Thus, after months of being told that Briggs & Baker was settling their accounts, many consumers found that creditors had sent their accounts to a collection agency or even initiated legal actions against them. The FTC further alleges that Briggs & Baker failed to honor its refund policy.

In June 2002, Jack Briggs left Briggs & Baker. Shortly thereafter, Todd Baker formed a new business, defendant Debt Resolution Specialists, Inc. (DRS). The FTC alleges that DRS engaged in business practices that are similar to Briggs & Baker’s. DRS allegedly advertises that it can negotiate reductions in consumers’ interest rates and principal owed because of “special relationships” with creditors, and represents that consumers who purchase DRS’ services will be debt free within three to 36 months. The FTC charges that consumers who use DRS’ services will find themselves worse off than when they started, with credit ratings suffering, debts escalating, and hard-earned money lost to DRS fees.

Jack Briggs has agreed to settle FTC charges. The terms of the stipulated order permanently bar Briggs from participating in any debt reduction, negotiation, or consolidation business and from misrepresenting any fact material to a consumer’s decision to purchase a good or service. Additionally, he will be required to pay $8 million if he is found to have misrepresented his financial circumstances.

The Commission vote to authorize staff to file the complaint and stipulated final judgment and order was 5-0. The complaint and the stipulated final judgment and order for permanent injunction were filed in the U.S. District Court for the Central District of California on February 4 and 6, 2004, respectively.

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.

NOTE: This stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final judgment and order requires approval by the court and has the force of law when signed by the judge.

Civ. No. CV04-0728
FTC File No. 032-3006