Dave Ramsey sued by listeners over failed promises of advertiser

Beloved by hundreds if not thousands of financial advisors who do business with him, evangelical Christian radio host and financial motivational speaker Dave Ramsey now faces allegations that he took tens of millions of dollars in fees over half-a-dozen years to promote a business that promised — but ultimately failed — to extricate Ramsey's devoted listeners from onerous real estate timeshare contracts.

At the center of the complaint by a group of Ramsey's listeners is his relationship with a defunct Washington state company, Reed Hein & Associates, which launched in 2012 promising to help terminate timeshare agreements, commonly advertising a 100% money-back guarantee.

There have been questions about the connection between Dave Ramsey and Reed Hein for several years.

For fees ranging from $4,000 to $72,000, Reed Hein promised to relieve or "exit" customers of their timeshare obligations, according to the complaint, which was filed at the end of April in U.S. District Court in Seattle. The Dave Ramsey listeners are seeking $150 million in damages.

As InvestmentNews reported in May 2020, Ramsey recommended Reed Hein's services even as it faced a complaint from Washington state's attorney general related to its business practices: "Reed Hein advertised a 100% money-back guarantee," the attorney general’s office alleged at the time. "In reality, many consumers have struggled to obtain refunds, and are still denied refunds even after the company has failed to deliver for years."

A year later, Ramsey told his audience that Reed Hein, also known as Timeshare Exit Team, had pulled its advertising because it could no longer afford it. In September 2021, Reed Hein and Washington Attorney General Bob Ferguson reached a settlement in which the company said it would stop its deceptive timeshare exit practices and pay $2.61 million to Washington.

For six years, Ramsey made false statements about Reed Hein’s knowledge, skill and ability to get customers out of timeshare obligations, and used his radio show, podcast, online programs, seminars and lectures to do so, the complaint alleges. Ramsey continued to promote Reed Hein despite ample notice that Reed Hein was defrauding Ramsey's listeners and followers, according to the complaint.

"From 2015 to 2021, Reed Hein paid Dave Ramsey and [his company] The Lampo Group to make false claims and instruct Ramsey’s faithful listeners to hire Reed Hein," according to the complaint. "By 2021, Ramsey’s promotions drove Reed Hein’s revenue from less than one-million dollars per year to more than $40 million per year. For his efforts, Reed Hein is believed to have paid Ramsey $450,000 per month, totaling greater than $30 million."

Although the lawsuit was filed on April 28, it was not reported until last Thursday by the Religion News Service. A message left for a spokesperson at Ramsey Solutions on Monday morning was not immediately returned.

A timeshare is shared ownership of vacation real estate, typically sold by the week. Timeshare exit businesses proliferated several years ago as many consumers looked to get out of the contracts, even before people began traveling less once Covid-19 began in 2020.

Ramsey's website, ramseysolutions.com, lists various products, shows and events, as well as "trusted services," a section where fans of the show can find real estate agents, tax advisors and financial advisors, all with the Dave Ramsey stamp of approval.

A connection to Ramsey means potential big business for financial advisors, who are constantly searching for ways to meet new potential clients.

Financial advisors pay an advertising fee to Ramsey Solutions and are deemed SmartVestor Pros, part of an online directory of financial advisors in a geographic area.

In 2017, InvestmentNews reported that the advertising fees for financial advisors ranged from $400 per month to close to $900 per month, based on the size and population of the territory, as well as the number of referrals that come in over a period of time. It's not clear whether or not that fee has changed over the past six years.

In the April complaint, the focus is on fees paid to Ramsey and the Lampo Group.

According to the complaint, they were "paid tens of millions of dollars over the course of more than five years by Reid Hein’s media group, defendant Happy Hour Media Group, to convince Ramsey’s loyal followers to buy into this scheme through the use of deceptive, incomplete, and false information that [Ramsey and Lampo] knew or should have known was false and deceptive in violation of Washington State’s Consumer Protection Act.

"Throughout his promotions, Ramsey assured his listeners that he had vetted Reed Hein and promised them that the company was the only trustworthy method to get out of their timeshare contracts," the complaint said. "He called Reed Hein 'legal specialists' and claimed the company had a proprietary process to achieve its 'exits.'"

"By March of 2021, Reed Hein and Happy Hour Media Group stopped paying Ramsey for his promotions," according to the complaint. "Only when the money ran out, Ramsey stopped promoting Reed Hein."