August 29, 2003
John E. Gustavsen, president of Jubilee Financial Services, a debt negotiation company, has been banned from advertising, marketing, or providing debt negotiation services, as part of a Federal Trade Commission settlement entered by the U.S. District Court for the Central District of Los Angeles.
Gustavsen also turned over his personal residence, valued in excess of $500,000, in partial satisfaction of a suspended judgment of $2,628,535, and forfeited his interests in all bank accounts frozen by the court earlier.
The FTCs original complaint, filed in August 2002, alleged that Gustavsen and other defendants lured consumers with false promises that consumers who enrolled in their debt negotiation program would be able to pay off their debts at a substantially reduced rate and that consumers would stop receiving collection calls from creditors.
The complaint also alleged that all of the defendants misled consumers about the effects of the program on their credit report and failed to tell consumers that, as a result of the defendants services, negative information would likely appear on the consumers credit reports and stay there for seven years.
The FTC later amended the complaint to include the allegation that the defendants falsely told consumers that money sent to the defendants would be held in a trust account until the defendants made agreements with creditors to pay off the consumers debts at a reduced rate.
According to the FTC, consumers who enrolled in the program and paid substantial fees to the defendants continued to receive phone calls and collection letters from creditors. In addition, the FTC alleged that when the consumers followed the defendants directions to cease making payments on their debts, many consumers were sued by the creditors.
Consumers credit ratings allegedly became worse and they lost the monies which had been placed in the so-called trust account because the defendants were regularly withdrawing the money to use it to pay the operating expenses of the various corporate defendants. Instead of finding themselves out of debt, the FTC alleged, many consumers were left with little alternative but to file bankruptcy.
The FTC amended its original complaint after determining that a trust account established to hold money of consumers was missing in excess of $2 million. In addition to the fourth count, the amended complaint added two additional corporate defendants, Gustavsen Learning Center (GLC) and Debt Relief Counselors of America (DRCOA).
