AmeriDebt, the consumer credit counseling company, has filed for bankruptcy.

There are also allegations of shady business practices.

Then the Internal Revenue Service, Federal Trade Commission and state regulators weighed in with a consumer alert about credit counselors. The FTC in November also sued AmeriDebt, one of the industries leaders, alleging it used deceptive marketing to bilk consumers.



FTC Commissioner Thomas Leary said in testimony to Congress that AmeriDebt advertises its services as “free,” when in fact the company retains a consumer’s entire first payment as a “contribution.”

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Leary cautioned in his testimony that some companies use their non-profit status as a badge of trustworthiness to attract customers, who are then duped into paying large fees. Those fees are sometimes funneled to for-profit companies.