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Going After "Debt Settlement" Companies

CAN PUT CONSUMERS IN DEEPER DEBT

5/20/2009

Doreen Melton described how the promises of a "debt settlement" company turned a small stack of bills into a mountain of indebtedness, "I just can't believe I did it. But it sounded so good!"
"And I thought, that's the answer to our prayers. We will do that, never realizing what a scam it was!"

Doreen is one of the thousands of New Yorkers who turned over their hard earned money to Nationwide Asset Services, which promised to reduce their debt by 40 percent, but New York Attorney General Andrew Cuomo says the company only lined it's pockets, and sunk consumers into a deeper hole.

Cuomo said, "They get people to believe who really want to believe, and who need to believe, and that is what makes this all the worse, frankly. They prey on people who are vulnerable."

The attorney general is suing Nationwide Asset Services, Credit Solutions of America, and has joined in a national crackdown on 14 other debt settlement companies, accusing them of false advertising and fraud.

Cuomo said, "And it sounds like they are serious, and they are credible. They also happen to be full of baloney, and fraudulent, and hucksters and scam artists, but it sounds great!"

Paul Atkinson of Consumer Credit Counseling Service told News 4 consumers over their heads in debt need counseling first from agencies licensed by the state and approved by the Better Business Bureau.

Atkinson said, "This settlement is simply a black hole, where it gets worse and worse and worse, and when you get out of it, you are harmed probably as badly, if not worse, than had you gone into bankruptcy."

If you believe you were duped by a debt settlement company, call the Attorney General's statewide hotline 1-800-771-7755, or the local number 853-8404.

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Debt Got You Down?

BBB Offers Clarity in Confusion over Debt Negotiation vs. Consolidation or Elimination

Buffalo, NY- Offers from companies to help consumers get out of debt are extremely tempting in troubling times while the public also find themselves battered on many other economic fronts. Offers of debt negotiation, debt settlement, and debt elimination are three different options available to consumers. The Better Business Bureau (BBB) advises consumers to make sure they understand these critical differences before enlisting the help of a company to manage their debt or they could end up making their current financial situation worse.

The unemployment rate in the US rose from 7.6 to 8.1 percent in February according to the U.S. Department of Labor and more families are struggling to make ends meet. While the unemployment rate continues to rise, so do complaints filed with BBB against companies that claim to help consumers manage their debt. In fact complaints against debt consolidation and negotiation companies rose by almost 19 percent in 2008 over the previous year.

"We hear a radio or TV ad nearly every day with these offers – it's very confusing for consumers," said David Polino, BBB President. "Whether it's an ad or an e-mail, the public is being bombarded with services to manage or reduce debt and it's hard to know which offer will work, let alone if the company can be trusted. Families in debt may think their situation can't get any worse, but trusting the services of some debt firms can actually lead to increased debt and bigger headaches," Polino added.

To help consumers understand various options for dealing with debt, BBB offers a brief explanation of debt negotiation, consolidation and elimination services and tips on finding help to deal with debt:

Debt Negotiation/Settlement

Debt negotiation companies claim that they will negotiate with a consumer's lenders to lower the total amount of debt owed for an upfront fee. Unfortunately, some consumers who paid for debt negotiation services found out that the company never contacted their lenders, but instead, took their money and ran. Because the debt negotiation company made it sound like they had everything under control, the consumer stopped talking directly with their lenders and ended up slipping deeper into debt. Relying on debt negotiation firms could also put a dent in a consumer's credit report.

Debt Consolidation

Debt consolidation companies offer to roll up various debts allowing the debtor to make one lower payment to the company, rather than many payments to the different lenders. While debt consolidation can make paying monthly bills more manageable ...consumers need to watch out. Some companies smack them with high fees and charge exorbitant interest rates, which means they end up paying much more in the long run.

Debt Elimination

Companies that offer debt elimination rely on many different schemes - but they all hinge on the notion that credit lines are illegal. Debt elimination companies typically provide, for an upfront