The Maryland attorney general's office has reached a settlement of more than $500,000 with Debtscape Inc., a Linthicum credit counseling agency that was accused of improperly charging fees to consumers years ago.
More than 1,000 Marylanders who used Debtscape services from 1999 to October 2003 could be due refunds, Philip D.Ziperman, an assistant attorney general, said yesterday.
Because of the size of the settlement, Debtscape is making monthly payments to the state, which eventually will make refunds to consumers over the next four to five years.
Until October 2003, nonprofits in Maryland were not allowed to charge fees for debt management services. Now licensed agencies can charge limited fees.
The state's Consumer Protection Division claimed that Debtscape didn't act like a nonprofit because it operated for the benefit of its former president, William Sargent, and two for-profit processing companies, DebtWorks Inc. and the Ballenger Group.
The state also alleged that Debtscape misled consumers with false claims that it had relationships with creditors and that its fees supported operating costs when they actually benefited Sargent, Debt- Works and Ballenger.
Debtscape denied the state's allegations. Since 2003, there has been a complete change in management and among the board of directors, said Dave Hensel, Debtscape's chief executive officer.
In a statement, the nonprofit said it was pleased with the settlement because: "It allows us to finally put the past behind and to focus, instead, on the way in which this company has operated since October 2003."
Debtscape is licensed by the state to serve Maryland consumers. The nonprofit was founded in 1999, and previously was known as Neway Inc. and Accucredit Inc.
Sargent, who died last year, had been a manager at AmeriDebt before launching Debtscape, according to the state. Several state and federal lawsuits accusing AmeriDebt of deceptive business practices helped push the Maryland nonprofit last year into bankruptcy court, where it is being liquidated.
DebtWorks was started by AmeriDebt's founder Andris Pukke, who is being sued by the Federal Trade Commission to recoup about $172 million in fees that consumers paid to AmeriDebt over the years. Pukke sold the DebtWorks assets in 2003 to Ballenger, which has settled complaints with the FTC and the Maryland attorney general's office.
John B. Williams, who has represented Pukke, said he was unfamiliar with the settlement and couldn't comment. Ballenger officials could not be reached.