Washington, DC - Robert J. Spagnoletti, the Attorney General for the District of Columbia, announced today that his office has distributed $123,900 to consumers across the country as a result of the District's lawsuit against a DC-based credit counselor, Credit Debt Solutions, Inc. (CDS), and its two principals, Barbara Carr, Chairwoman of CDS, and James Kehoe, Manager of CDS. Consumers are receiving checks for up to $8,000.

In June 2003, the District of Columbia Attorney General's Office (OAG) sued CDS, Carr, and Kehoe (the "Defendants") based upon their activities in offering credit counseling and debt management services to consumers across the country. According to OAG's lawsuit, CDS advertised that it could help consumers get out of debt and help "lower debt payments up to 50%." OAG charged that consumers who decided to seek the assistance of CDS were required to make a "voluntary contribution" in the amount of one month's debt payments in addition to paying monthly fees on each account managed by CDS. Yet, according to the allegations, many consumers who gave their money to CDS found that instead of getting out of debt, their problems only increased. OAG alleged that CDS failed to forward many consumers' debt payments to their creditors.

In August 2003, the District entered into a settlement with the Defendants under which consumers were eligible for restitution if CDS failed to forward debt payments to consumers' creditors, or if CDS was at fault in failing to obtain a reduction in the interest rates charged by consumers' creditors. The Defendants paid $123,900 into an escrow account set up by the OAG as an estimate of the restitution to which consumers would be entitled under the agreement. The Defendants also agreed to permanently cease offering credit counseling and debt management services from the District of Columbia or to any District of Columbia consumer. The Court authorized OAG last month to release the escrow funds. Defendants are appealing this decision.

"We are very pleased that we have been able to obtain significant recoveries for consumers who were harmed by CDS's practices," said Attorney General Spagnoletti. "Consumers are receiving checks that range from around $100 to around $8000, depending on how much they lost as a result of doing business with CDS. The average refund is just under $1000," Spagnoletti added. The funds are being disbursed to 132 consumers.

Consumer education and complaint information can be found on OAG's consumer protection website.