The D.C. government yesterday filed suit against Ameridebt, a nonprofit debt counseling service based in Germantown, and its former president for alleged violations of the District's consumer protection law.

In a complaint filed yesterday, the District alleges that Ameridebt is primarily set up to generate new business for Infinity Resources Group Inc., a for-profit lender in the District. The suit names former Ameridebt president Andris Pukke, who also has ties to Infinity, as a defendant.

The majority of consumers who call Ameridebt for debt counseling are sent to D.C.-based Infinity and told that they may qualify for a debt consolidation loan. Infinity charges customers an advance fee to participate in the loan program, the suit alleges.

The Better Business Bureau serving metropolitan Washington, citing documents from an earlier suit against Infinity, said that only about 2 percent of the those who paid the fee were approved for a loan, whether they met Infinity's specified qualifications or not.

In August, the District filed suit against Infinity alleging that it accepted advance fees from consumers in exchange for "loan commitment letters," when the company made no commitments to lend the consumers money, said Edward J. Johnson III, chief executive of the local Better Business Bureau, which helped in the investigation.

"They are not in the business of providing loans. They are in the business of collecting fees," said Johnson.

Pukke, senior officer and sole shareholder of Infinity Resources Group Inc. since its inception in 1995, was also president of Ameridebt from about 1997 to 1998.

From sometime in 1997 to about June 1999, Ameridebt has referred consumers "exclusively or almost exclusively to Infinity Resources Group Inc. for debt consolidations loans," the suit states. The District also alleges that in February 1998, while Pukke was an officer of both Ameridebt and Infinity, Ameridebt instituted a plan whereby Ameridebt counselors could earn bonuses for referring customers to Infinity.

Pukke said the allegations in the suit are baseless.

"Infinity Resources Group Inc. has provided and continues to provide a valuable public service to needy debtors," Pukke said in a statement yesterday. "I am proud of my role as a founder and principal officer of the company, and I deny all of the charges of the complaint."

According to the D.C. Office of the Corporation Counsel, which brought the suit, Ameridebt worked like this:

During initial telephone conversations with consumers seeking credit counseling, Ameridebt counselors tell them of the possibility of qualifying for a debt consolidation loan from Infinity. Based on the amount of debt a consumer has, Ameridebt sets a payment amount that the consumer must send to Ameridebt each month for disbursement to his or her creditors, the lawsuit says.

According to the suit, Ameridebt's counselors tell consumers that if they sign up for Infinity's loan program and make six consecutive monthly payments in a timely manner, Infinity will review the consumer's account and most likely approve the consumer for a debt consolidation loan.

But, according to the District's complaint, the amount of money that Infinity has received in fees from consumers since 1997 "has far exceeded the total amount of money that Infinity has actually lent to consumers."

The District has asked the court to award compensation for consumers.

"Ameridebt considers this action against it by the District of Columbia to be unfounded," the company said in a statement yesterday. "Ameridebt is proud of its record of achievement in assisting its clients toward meaningful debt reduction and looks forward to responding to the allegations in the complaint."

Johnson said the Better Business Bureau has received 4,158 phone calls in the past year and a half about Ameridebt, making it the second most called about company in 1999.

Ameridebt says it has 15,000 current clients and claims to have helped more than 40,000 people since it began operations.

According to Durant Abernethy, president and CEO of the National Foundation for Consumer Credit, the number of credit counseling organizations has exploded--600 new firms in this decade--along with the surge in consumer debt.

"The NFCC has been certainly concerned this decade with establishing and enforcing quality-insurance standards for our members," he said.

Consumers with information about the business practices of Ameridebt or Infinity may call the Office of the Corporation Counsel's consumer hot line at 202-442-9828.