Monday, October 27, 2003
The company said it will stop recruiting to focus on its existing customers.
BALTIMORE (AP) -- Credit-counseling service AmeriDebt, accused of defrauding consumers and falsely portraying itself as nonprofit, announced it will lay off most of its workers and stop seeking new customers because of recent "negative publicity."
Last month, Missouri sued AmeriDebt, accusing the company of defrauding indebted consumers of millions of dollars. In February, Illinois filed a similar suit against the company.
Earlier this month, the Internal Revenue Service and the Federal Trade Commission announced they would investigate nonprofit credit counseling services to make sure they serve consumers and qualify for their tax-exempt status. No specific firms were named.
AmeriDebt announced that as of Nov. 1 it will "cease outreach to new consumer clients in order to focus on serving the counseling and educational needs of its existing clients."
Customer service
AmeriDebt counsel Zynda Sellers said Friday the Germantown-based company was "in the process of releasing most of its current employees," but she declined to say how many of its approximately 50 workers would be laid off.
"It's going to be very significant," Sellers said. "AmeriDebt is not happy about this. It's very unfortunate."
She said the company was also stopping all advertising.
Sellers declined to answer specific questions about the decision to stop seeking new customers, but she said in the statement: "For better or for worse, our ability to serve new consumer clients has been compromised by the negative publicity surrounding our organization. As a result, we believe that the only right thing to do at this point is to focus on the American debtors we already serve."
On its Web site, AmeriDebt said it has worked with 400,000 people -- with more than 90,000 clients as of July.
Annually, an estimated 9 million Americans contact a credit-counseling agency -- often the last resort for consumers before filing bankruptcy.