Minnesota Attorney General Shuts Down Debt Settlement Companies

On October 21, Minnesota Attorney General Keith Ellison announced a settlement with two debt settlement companies, Financial Solutions Group and Accelerated Debt Settlement.

The companies were alleged to have:

• Promised to negotiate debt settlements with creditors but allegedly collected fees before performing any services, in violation of Minnesota Statute 332B.09;
• Misrepresented their services or created the likelihood of consumer confusion regarding their services in violation of §§ 332B.11, 325F.69, and 325D.44; and
• Operated without the required registration with the Minnesota Department of Commerce in violation of Minnesota Statute § 332B.03.

The settlement includes the following terms:

• Injunctive Relief: The companies are permanently enjoined from conducting any debt settlement business in Minnesota without proper registration and compliance with state laws.
• Monetary Payment: The companies must pay $1,081,756.59, representing the total amount collected from Minnesota consumers. This amount will be used to provide full refunds to affected consumers. An initial payment of $600,000 is due within 10 days of the court’s entry of the settlement, followed by six additional payments of approximately $80.292.
• Stayed Civil Penalty: The settlement includes an additional civil penalty of $581,756.59 that is suspended unless and until the companies violate the terms of the settlement. The penalty amount will decrease incrementally with each installment payment received by the Attorney General’s Office.

Attorney General Ellison has been active in the debt collection space. As previously discussed here, he supported the passage of the Minnesota Debt Fairness Act, which, among other things, prohibits the automatic transfer of medical debt to a patient’s spouse, prohibits medical debt from being reported to consumer reporting agencies, is intended to prevent the collection of a consumer’s last $4,000 in their bank account, and caps garnishment levels based on income. Attorney General Ellison also initiated an investigation related to medical debt, discussed here.

Our Take:

Attorney General Ellison’s active role in the debt collection area indicates a continued focus on consumer protection. Debt settlement companies operating in Minnesota and other jurisdictions should closely monitor regulatory and legislative developments and ensure their practices align with evolving legal standards.