GREENBELT, Md. – The founder of the credit counseling firm AmeriDebt on Monday agreed to pay $35 million to settle suits filed by regulators and former customers over $172 million in allegedly hidden fees the company collected from financially strapped debtors.
Pukke, who made a fortune off businesses that catered to customers in debt, is also barred from working in credit counseling, debt management or telemarketing as part of the settlement.
The settlement came a day before a federal court in Greenbelt was set to hear the FTC's lawsuit against Pukke (PUCK'-ee) and a class action lawsuit filed against him by former AmeriDebt customers. The payment covers both cases, according to the FTC.
The agreement is subject to approval by the federal judge as well as by the court hearing Pukke's personal bankruptcy filing.
The FTC filed its lawsuit against Germantown-based AmeriDebt and Pukke in 2003, part of a push by federal regulators to crack down on nonprofit credit counseling firms accused of cheating customers who sought help with paying their bills.
AmeriDebt promised to help customers lower their monthly payments by consolidating their loans and helping customers get lower interest rates.
But the FTC alleged the first payment customers made, often several hundred dollars that they believed would go toward paying down their debt, was instead classified by AmeriDebt as a "contribution" that went to the firm. Customers were also pushed to make monthly contributions to AmeriDebt.
The FTC said AmeriDebt did not properly disclose these fees to customers and that many were confused about where their money was going.
Regulators said much of the fees AmeriDebt collected went to a for-profit sister company controlled by Pukke called DebtWorks. Pukke allegedly used that money to fund a lavish lifestyle, with mansions in Maryland, Florida and California.
AmeriDebt filed for bankruptcy in 2004. The company's remaining clients have been shifted to another credit counseling firm.
Pukke also filed for bankruptcy in July, but a federal judge froze his assets after the FTC claimed he was shifting money to offshore accounts to protect them from regulators. A court appointed receiver is currently trying to locate all of Pukke's assets. The settlement requires Pukke to cooperate with the receiver.
Pukke's wife, Pamela, who was named in the case because she benefited indirectly from the alleged scheme, settled with the FTC late last month.