Stephen Gibbons, Assistant District Attorney   CONTACT PERSON:
Robin B. Wakshull, Deputy District Attorney
Consumer Protection Unit   
(408) 792-2584   For release on August 2, 2004     DISTRICT ATTORNEYS SETTLE CIVIL CASE INVOLVING DEBT MANAGEMENT PLANS   The District Attorneys’ Offices of Santa Clara and Alameda Counties have reached a settlement in a civil action against Behzad Aghili and Marziyeh Tehrani, who sold debt management plans to consumers in California, and against Consumer Credit of Des Moines, an Iowa nonprofit organization that administered them. All parties agreed to the entry of a judgment, which was signed by Santa Clara County Superior Court Judge Neal Cabrinha. The judgment provides injunctive provisions to prevent future violations of the law, restitution, and civil penalties. The restitution program will provide refunds to current and former clients of a portion of the administrative fees paid between January 1, 2002 and the date of entry of judgment.   The complaint alleges that Aghili and Tehrani, doing business as AAA Financial Services and Neo Financial Services, Inc., violated California’s Unfair Competition and False Advertising Laws, and the California Check Sellers, Bill Payers and Proraters Law, which governs nonprofit and for-profit  providers of debt management plans. A debt management plan, often referred to as debt consolidation, involves an agreement by a debtor to have a third party negotiate new payment terms with his creditors. The debtor then makes one monthly payment to the third party, who distributes the money to the individual’s creditors who are participating in the plan.  Generally, a consumer is charged a monthly administrative fee for these services.   The complaint alleges that Aghili and Tehrani advertised and sold debt management plans to California consumers. Aghili then contracted with Consumer Credit of Des Moines to administer the plans and process the payments between consumers and their creditors. Aghili and Tehrani did not have a prorater’s license from the California Department of Corporations and were not otherwise authorized to provide debt management services. The complaint also alleges that Aghili and Tehrani charged excessive fees and made misleading statements about the terms and benefits of their debt management plan. This included statements that they were “licensed, certified, insured and bonded,” that creditors were not permitted to negotiate debt reduction directly with consumers, that they had a 96% success rate, that the plan was free, and that interest owed on consumer debt could be waived entirely under the program. The complaint also alleges that prior to the judgment, Consumer Credit of Des Moines was not in full compliance with California laws regulating debt management plans provided by nonprofit organizations. Consumer Credit of Des Moines has filed documents with the Department of Corporations to comply with the state statutes and to continue services to Californians.   ###

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