CREDIT COUNSELING AmeriDebt files for bankruptcy

The company says operations will continue.
BALTIMORE (AP) -- A credit counseling company accused of using deceptive marketing to rip off hundreds of customers filed for bankruptcy protection.
AmeriDebt spokeswoman Christine Kraly said the Chapter 11 filing Saturday "will in no way impede" the company's operations. Payments made by its customers are processed through a separate trust account that will not be affected, the company said.
"AmeriDebt's first priority is and always has been serving its consumer clients," the company said in a statement.
In November, AmeriDebt became the first credit counseling company to have a federal lawsuit filed against it. Five states also have sued the company.
"We have pursued companies in the past that have gone the bankruptcy route and recovered money for consumers, so we're going to hang in there as long as it takes," said Scott Holste, a spokesman for the Missouri attorney general's office.
Allegations
The Federal Trade Commission alleged the company hid fees and did not educate people about how to get out of debt. Regulators said AmeriDebt made customers think that an initial fee would be part of their debt-reduction payments to creditors. Instead, it went to the company.
AmeriDebt has disputed the characterization, saying it provides educational services to customers. It says the payments cited by the FTC are "voluntary contributions."
Federal regulators also accused AmeriDebt of marketing itself as nonprofit, but actually works to make money for affiliated for-profit companies. The agency also said the company's radio and television ads said AmeriDebt helps customers learn better financial management skills.
AmeriDebt laid off most of its workers in October and stopped seeking new customers in November because of what it called "negative publicity" and to focus on serving its existing clients. The company also stopped all advertising.
AmeriDebt said it has worked with 400,000 people and had more than 90,000 current clients as of July.