JK Harris and Financial Recovery Systems: partial refunds for consumers

June 12, 2008

Two South Carolina companies who purported to help people in financial trouble but were actually offering little or no benefit at all have agreed to stop misleading consumers. The North Charleston, SC companies JK Harris, a tax-relief company that did not deliver on its claim to settle IRS debts for “pennies on the dollar”, and Financial Recovery Systems, LLC, a credit repair company that sent out bogus notices to make people think they needed credit help, have agreed to pay $1.5 million in refunds to consumer across the country.

“Not only was the behavior of these companies illegal, their tactics were deplorable.” said Attorney General Steve Rowe.

Maine and 17 other states attorneys general entered into consent judgments and assurances of voluntary compliance with the two companies. The attorneys general alleged that JK Harris did not help consumers with their tax problems as advertised and refused to give refunds when promised services were never completed. They also alleged that Financial Recovery Systems attempted to frighten consumers into signing up for credit repair services they did not need by sending them bogus notices about judgments against them. The company’s services also violated state and federal credit repair laws.

According to the attorneys general’s complaint, JK Harris regularly advertised that it had more than 450 offices nationwide. However, the attorneys general found that only the main office in North Charleston handled consumers’ files. If a consumer wanted to meet with a JK Harris representative about his or her file, the consumer had to physically travel to North Charleston, more than 1100 miles from Maine. The other offices were staffed only by sales representatives who could not handle consumer inquiries.

JK Harris also said that consumers’ files would be handled by “tax experts” or “ex-IRS agents” when in fact the people handling the cases did not have the advertised expertise. JK Harris case managers changed frequently, and consumers complained that they often had to provide the same information to the company several times.

JK Harris promised to settle debts for “pennies on the dollar” and charged money upfront for this service without actually determining if consumers qualified for an IRS Offers in Compromise (OIC) or while knowing that consumers didn’t qualify. The IRS approves only a small percentage of OIC’s each year.

Under the terms of today’s consent judgment, JK Harris must clearly explain to consumers under what circumstances they would qualify to reach a compromise with the IRS on back taxes. JK Harris will also make several reforms to its advertising and sales practices. Financial Recovery Systems is barred from offering or performing credit repair services that don’t comply with state and federal laws. The judgment also applies to Professional Fee Financing Associates, L.L.C, a related company that provided financing for consumer contracts with JK Harris.

Read the full Consent Judgement.

Since 1999 the Maine Attorney General’s office received 62 complaints about JK Harris. Any Maine consumer who filed a complaint with the Maine Attorney General’s Office, the Better Business Bureau or the South Carolina Department of Consumer Affairs or who files a complaint within the next 90 days will be eligible for a partial refund. The $1.5 million will be distributed on a pro rata basis to those consumers who have filed complaints.

Read the full Complaint.

Consumers can contact the Maine Attorney General’s Consumer Protection Division toll-free at (800) 436-2131 or via email at consumer.mediation@maine.gov.

States who joined Maine in the judgment are Arkansas, Arizona, California, Connecticut, Florida, Illinois, Massachusetts, Michigan, Minnesota, New York, North Carolina, Ohio, Pennsylvania, South Dakota, Tennessee, Vermont, and West Virginia.

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NEWS RELEASE June 12, 2008 David Loughran, (207) 626-8577