CCCS of Utah was a nonprofit corporation that provided debt management services to consumers for a fee, and operated in a manner similar to that of other consumer debt management companies. It charged consumers an initial setup fee for the cost of enrolling in the program, analyzing consumer debt, and setting up a plan of repayment of the debt. Once enrolled in the program, consumers made monthly payments to CCCS for debt management services. Part of the monthly payment went to the company and purportedly covered the cost of servicing and managing the debt. The remainder of the monthly payment was to be used to pay the consumers’ debts. The fee was to be deposited into an operating account for CCCS, but the portion used to pay consumer debt was to be deposited into a trust account. CCCS was then to issue checks or electronically transfer money from the trust account to pay consumers’ creditors. Money in the trust account was only to be used for paying the consumers debt and was only to be disbursed to creditors. Consumers did not receive an itemized monthly statement from CCCS.

Because of financial difficulties over several years, the action alleges that CCCS is currently $85,000 in debt to creditors for rent, utilities, and services. CCCS is not current with required tax and withholding reports and has allegedly filed false reports with the IRS and the Utah Division of Corporations and Commercial Code.

In March 2004, although consumers had been making timely monthly payments for services, the defendants had allegedly allowed a sizable deficit to accumulate in its trust account with Bank One. Due to long-standing its financial troubles, including failure to pay payroll taxes and making fraudulent filings, in February and March 2004, CCCS either failed to disburse payments to creditors or issued payments to creditors without sufficient funds in the trust account to cover the payments, so that consumers did not receive the services they paid for within the time required. Due to the deficit in the trust account, the defendants allegedly opened a new trust fund at Bank One and started depositing monies received from consumers in it. When the account reached about $100,000, Bank One froze the new trust account because of the Bank's potential losses and the shortfall in the old trust account.

On March 11, 2004, the new Bank One trust account was unfrozen, and the defendants allegedly transferred over $91,000 into existing accounts at other banks. On March 17, 2004, all Utah debt management and consolidation companies were required to be registered and bonded with the Division due to a change in the law. The lawsuit alleges that the defendants failed to comply with the law, and were notified by the Division that they had 30 days to come into compliance.

On March 25, 2004, the defendants allegedly started making payments on behalf of consumers from the accounts at other banks. Even so, they failed to cure all the late payments from February and March 2004 or pay fees caused by bounced checks.

The action alleges that CCCS owed its clients a fiduciary duty to track, account for, manage, and control consumer funds to prevent losses and mismanagement. Further, it had a responsibility to timely advise consumers concerning the nature and viability of its trust accounts. Because the defendants failed in all of these obligations, and because it failed to register and be bonded as a credit service organization, CCCS is violated the laws that regulate Utah credit service organizations.

By early May 2004, defendant Scott McCagno had resigned as CCCS' president, and the service was no longer answering its phones. Visitors to its office were told by a single remaining staff member the organization was out of business, having sent out the final checks on behalf of its clients.

Persons eligible to take part in the lawsuit may contact the prosecuting attorneys for more information.