Minn. AG sues 6 debt settlement companies

Minnesota Attorney General Lori Swanson filed suit Thursday against six companies that were supposed to help consumers deal with debt, but instead, the companies took people's money and never gave it back.

Bjorn Lestrude was $16,000 in debt when he contacted a debt settlement company he saw advertised on TV.

"They told me stop paying your creditors we'll handle everything for you from here forth," Lestrude said.

Lestrude, 26, paid the company hundreds of dollars. He assumed the company was using the money to resolve his debt. But Lestrude kept getting calls from creditors and they told him the debt settlement company had never called them.

Lestrude later learned the company had done nothing to help him and it never returned his money.

"It's unbelievable," he said. "How can somebody advertise all this stuff on TV and how can they actually rip people off like this and actually get away with it?"

Similar stories led Minnesota Attorney General Lori Swanson to file suit against six debt settlement companies based in Florida, Texas and California.

the citizens are really trying to do the right thing," Swanson said. "They're swimming in debt; they're looking for a life preserver. But they end up finding an anchor that simply weights them down with more debt."

The suits are the first filed under a state law passed last year. The law requires that debt settlement companies be licensed in Minnesota and caps the fees they can charge.

Swanson's suits allege the companies violated those requirements.

"They're very slick at what they do," she said. "When they're trying to get you to sign up, they have the glitzy Web sites and marketing materials they tell you they can take care of your financial trouble...Once you pay them the money though, they often times disappear."

California-based Morgan Drexen denies the charges and says the Attorney General is acting irresponsibly.

The other companies didn't immediately return calls for comment.

Swanson's lawsuits seek civil penalties against the companies and restitution to victims for the fees they paid.

The attorney general said people seeking help with their debts should look for non-profits certified by the Minnesota Department of Commerce.