North Carolina Department of Justice
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AG Cooper stops credit firm that sunk consumers deeper in debt

Release date: 11/16/2004

Knight Credit of Fayetteville promised to help soldiers, other consumers but charged high fees

Raleigh: A Fayetteville company that misrepresented its services and charged illegal fees to consumers who wanted to get out of debt has been ordered to stop, Attorney General Roy Cooper announced today.

“People turned to this company because they needed help paying bills and making ends meet,” said Cooper. “But they wound up deeper in debt because this so-called credit counselor charged hefty fees.”

Cumberland County Superior Court Judge Joseph R. John, Sr. yesterday approved Cooper’s request to stop Knight Credit Services, Inc. and Knight Credit Counseling Services of Fayetteville and Lumberton from deceiving its customers and engaging in illegal debt adjusting, credit repair services and loan brokering. Jaime Martin Acosta, the company’s president and C.E.O, who was also named as a defendant, agreed to the terms of the court order.

Knight is also prohibited from collecting any money from North Carolina consumers for these services and is required to turn over business records to the Attorney General’s Office within 3 days. In addition to this preliminary injunction, Cooper is seeking a permanent ban on Knight’s services as well as cancellation of all contracts with North Carolina consumers, refunds and civil penalties.

A total of 41 consumers complained to Cooper’s office about Knight. Knight’s clients include soldiers stationed at Fort Bragg and Pope Air Force Base and their families.

As alleged in the complaint, Knight offered to help financially strapped consumers pay off their debts and improve their credit. Knight told its customers that the company would negotiate with their creditors to reduce monthly payments, interest rates and fees. Consumers were instructed to stop paying their creditors and to instead make monthly payments to Knight, which the company promised to use to pay consumers’ bills. People paid hundreds and even thousands of dollars to Knight to settle debts.

However, Cooper contends that Knight kept some of its customers’ money as profit despite claims that it provides a non-profit service. It is against the law in North Carolina to charge consumers money for debt adjusting, the practice of negotiating with creditors to pay off consumers' debts. For example, Knight kept consumers’ first monthly payment as a “security deposit.” Some consumers were led to believe this payment would go to pay their creditors, while others were told they would later get the deposit back. Instead, Knight kept the funds and consumers did not receive the deposit back as promised. Knight also charged consumers additional fees.

Many consumers complained that Knight failed to pay their creditors on time, adding late fees to consumers’ debts and worsening their credit. According to affidavits filed with the lawsuit, some consumers discovered that money they paid to Knight wasn’t being used to pay bills when creditors began calling, complaining that they were being paid late or hadn’t been paid at all. One couple paid more than $1,500 to Knight but learned later that only $350 had ever been used to pay their bills with Knight keeping the rest. Another client paid approximately $1,700 to Knight, none of which apparently went to her creditors.

Cooper also alleges that Knight violated state law by promising to restore consumers’ credit rating in exchange for up-front payments of as much as $1,500. Consumers who paid steep fees never saw their credit improve. In addition, Knight charged advance fees for loans in violation of loan brokering laws. According to consumers who paid the fees, Knight failed to arrange any loans.

Consumers should be skeptical of anyone who promises to clean up their credit, Cooper warned. No one can get credit bureaus to delete accurate information from credit reports. People can dispute mistakes on their credit report directly with the credit bureaus for free.

Consumers who need help managing debts should check with with a national accrediting organization such as the National Foundation for Credit Counseling at 1-800-388-2227 or to find a reputable local counselor.