On Thursday May 7, 2009 New York Attorney General Andrew Cuomo issued subpoenas to 14 debt settlement companies and a law firm. Cuomo is part of a multistate effort to regulate debt settlement companies, which Cuomo says are “offering consumers false hope, charging tremendous fees and leaving them in a worse financial situation.”
Renegade Industry
Cuomo was already investigating Nationwide Asset Services, Inc. and Credit Solutions of America, Inc. Now his office has announced that the following firms will be investigated for taking part in a “renegade industry:”
- American Debt Foundation, Inc.
- American Financial Service
- Consumer Debt Solutions
- Credit Answers, LLC
- Debt Remedy Solutions, LLC
- Debt Settlement America
- Debt Settlement USA
- Debtmerica Relief
- DMB Financial LLC
- Freedom Debt Relief
- New Era Debt Solutions
- New Horizons Debt Relief Inc.
- Preferred Financial Services, Inc.
- U.S. Financial Management Inc. (d.b.a. My Debt Negotiation)
- Allegro Law Firm
Specifically, Cuomo’s office is seeking out answers regarding the success rate of debt settlement companies and the fee structures. It is anticipated that Cuomo will find that the vast majority of debt settlement clients drop out after several months paying hundreds or thousands of dollars in fees and failing to experience the promised savings through settlement. Cuomo summarized his expectations from the investigation:
Our mission is clear: to hold unscrupulous businesses accountable; to rein in a renegade industry; and to ensure that people are not victimized when faced with financial hardship.
Debt settlement companies have for years operated with little regulation of their business practices. Most of these companies allow and even encourage their employees to make exaggerated claims, such as being able to settle their debts for as little as 25% of what they owe. They inform people not to pay their bills.
The truth is that creditors have no legal obligation to settle. Creditors despise debt settlement companies because they actually reduce the amount of money that they typically receive from debtors that have defaulted on debt.
This action represents a major shift in the debt settlement industry. If Cuomo imposes heavy fines or forces reparations to victimized debtors, then many of these companies likely will be forced out of business. This would indeed represent a win for consumers, since only a small fraction of those that entered a debt settlement services contract have ever completed their agreement.
Cuomo’s Recommendations to Debtors
The New York Attorney General’s office advised that many consumers would be more successful working directly with their creditors, seeking credit counseling or getting legal advice on bankruptcy. Debt settlement is sometimes an imperfect option when you handle it yourself, but it rarely is worth it to hire a company that claims to settle your debt for you. The consequences (fees, judgments and ruined credit) are just too severe.
Tags: Cuomo investigages debt settlement companies, debt settlement companies, debt settlement rogue industry
[…] October 2007 ← Cuomo: Debt Settlement a Rogue Industry […]
i recently signed a contract to have Allegro Law firm represent me. My creditors have not received any money yet and I hav e been paying them $ 300 pr month since January. I have been advised by a creditor agency to stop paying them and they will settle the debt. I don’t know if I can trust the debt agency that contacted me on behalf of FIA card services. They call themselves Client Services Inc. What should I do if this latter co. says that the bank will settle the debt for less than half if I can make the payments in three installments. How do I know they are they are legitimate. They are out of Missouri. Thank you for any help you may be able to assist me inthis matter.
Sandra Creighton
Sandra,
If you are able to pay creditor in three installments, just do it. Make sure to get in writing that creditor report on your credit “pay as agreed”.
Negotiate with them your balance to be paid as low as you can. This way you save your credit.
Problem is that many people cannot afford to pay in three or four installments. Debt settlement company can offer you program with payments you can afford. Make sure when you enroll all your creditors are aware of it. A lot of debt settlements companies do not do that. If you need more info refer to our “contact Us” page on our site and I will call you back.
Thx.
[…] For related information, research debt settlement company ratings or see what New York Attorney General Andrew Cuomo says about debt settlement companies. […]
In 1996 I was the primary agent/shareholder of a small business ‘corporation’ that was incorporated in the State of Texas. I had a brief dealing with a ‘Debt Mgmt. Company’, then the owner Roger Dill dba, Adams, Baker & Smith, who came to us with knowledge that the corporation was in financial problems and also with specific information concerning certain creditors. He offered a service to negotiate each for a fee & I agreed that they could represent the corporation for the purpose of their offered debt negotiations. When he came back with the settlement figures and his fees, I basically replied that this was not acceptable & that in fact atleast 2 of the negotiated amounts/creditors had already been settled/paid. Of course, this did not end there – he still attempted to collect on his fees…. Soon after, the corporation was forced to pursue Chapter 11 bankruptcy and the following was ‘in effect’ a slow gradual pay out of debt. and soon to come final liquidation of assets to closing of business operations by the end of 1999.
At some point, Roger Dill pursued small claims process to sue me personally for the corporate debt. (according to Texas bankruptcy laws you cannot) – but he was able to gain a judgment against me anyway. Seems I did not show up at court because I didn’t know anything about it – conveniently was never served/notified, etc… so by default the judge granted in favor of the plaintiff. Now, over 12 years have passed & I am served with a ‘Writ of Scire Facias’ (request by the original plaintiff to revive a dormant judgment) – now DBA Innovative Financial Solutions in San Antonio, Texas – and to say the least am dumbfounded because over the years I have been very careful of monitoring my credit during the ‘personal financial rebuild’ processes, etc… and have never noted anything with reference to a judgment on me…only thing I can assume is that he was never able to take out an abstract on me because he does not have any of my personal information (remember the debt was not mine personally) & he never made any attempts to collect on me for the judgment. Presently, I have acquired the services of an attorney to represent my interests and in fact have decided that my only recourse is to sue Roger Dill for fraudulent & malicous collection practices.
My point is that this type of business practice has existed for quite some time and with the internet it has only expanded many, many times. This whole business is shady at the very least and one should be aware that there are certain laws that can protect you against these predators. There needs to be more awareness & proactive measures need to be put in place to monitor these kinds of activities. These types of business will approach you when you are weak and will string you along until you become wise to them. The internet can be used against these people and at tremendous levels because ‘today’ the internet is the source of information for a very large and growing community.
I will leave it at that ,
Thanks
Mike
Dear Mike:
Your situation is indeed an unfortunate one in which a debt settlement company acted in a manner that made your situation far worse, not better as they claim. I noticed that Innovative Financial Solutions had a “D+” rating with the BBB and that there were no complaints filed within the past 36 months.
By posting your story here, you have undoubtedly saved dozens of future victims from falling for the false promises and aggressive collection tactics of this corporation. You may wish to consider filing a formal complaint against the entity with the Better Business Bureau and the Texas Office of the Attorney General.
Good luck with your upcoming lawsuit.
Kenneth,
Thank you for your response & yes I have also noted the BBB rating and will be filing a complaint with both the BBB & the Texas Office of Attorney General. I don’t want to make this a personal vendetta, but I feel he needs to be taught a lesson. The whole ‘small claims’ court topic I think is another area that should be looked into. It was designed as an informal setting to settle disputes, but if worked the right way (or the wrong way) by the “evil do’er”, it may be misused as an investment method by people who specialize in extorting money from others…did you know that a judgment earns interest and in my case a 5k judgment over 12 years is quite alot of money.
Anyway, yes the law is on my side & I am fortunate to be able to hire a good attorney to represent me and we have him against the wall unless he NOW meets my settlement requirements. I can only hope to put him out of business so that he does not continue to hurt other people.
Thanks Again!
Mike
[…] agreeable to both you and your creditor may be more difficult than you might think. Despite the claims of debt settlement companies who are increasingly being shut down due to deceptive trade practices, large credit card issuers […]