And the next industry under investigation....Debt Settlement

For years, I've cringed when I hear those offers to "Wipe out your debt" or "Repair your credit."

Now, New York Attorney General Andrew Cuomo has launched a nationwide investigation of the debt settlement industry.

It's about time. I don't know why people have insisted that the way to fix their debt problems is to pay someone to fix them. But they do.

"In the end, most consumers who turn to debt settlement firms for help wind up worse off than before -- with higher debts and lower credit scores than when they first asked for help," Susan C. Keating, president of the National Foundation for Credit Counseling, said in a recent statement.

I've heard the stories. The consumer stops paying his debt on the advice of the debt settlement company. The fees start piling up. The creditor sues the consumer. Even if the debt eventually is reduced, the fees for getting this done were high, debt forgiveness can trigger additional federal income tax, and the experience was very rough.

Cuomo announced he's looking into the business practices of 14 firms and one law firm.

He issued subpoenas to:
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. (also knowns as My Debt Negotiation) and the Allegro Law Firm.

According to a news release from his office, the subpoenas are for information about the companies’ fee structures, how many people have benefitted from the companies’ services and what kind of relief the companies are actually providing.

Cuomo's office also said it is also investigating Nationwide Asset Services, Inc.and Credit Solutions of America.

Comments

We don't want to pay our bills and along comes these low lives telling us we can consolidate and eliminate debt. The American way is to build credit then max it out and declare bankruptcy.

Posted by: Sinor Limpio | May 14, 2009 2:16 PM

Thanks so much for taking the time to post this information. With the economy the way it is right now, with all of the layoffs and more to come; government spending and deficit out of control; the continued housing slump; one wonders where to turn for help. It is nice to know that someone is putting out the information we need to protect ourselves, as consumers.

Posted by: Debt Reduction | June 10, 2009 6:39 PM

Posted by: Debt Reduction | June 17, 2009 9:35 PM

These so called "debt settlement" companies can not do anything more than what anyone can do.
What they do is: once you stop payments, 2-3 months later they contact your creditors and ask them to settle the dept at 30 cents, 40 cents or so to a dollar. Anyone can do the exact same thing also, depending on the situation some creditors will accept a partial payment on what you owe and run with it. The only difference is, you don't pay fees to a third party and actually creditors are more willing to work with the debtors than a third party.

Posted by: PG | July 2, 2009 5:07 PM

There is only one way to get out of the debt zone and that is to pay off your debt. No need to pay or hire someone who will just tell you to stop paying your debt as your best way out of debt because it is not. You could either ask your creditor to lower the interest rate or if you really want to pay off your debt in lower interest rate then why not consider consolidating your debt.

Avoiding or not paying debt even declaring bankruptcy will not help you in any way.

It is really a good thing that the Fed is spending some time to correct this issue.

Posted by: Debt consolidation | September 29, 2009 7:42 AM

Markets need to be made aware on different debt financial processes , proper educating programs may facilitate proper processes .

Posted by: debt rescue | November 7, 2009 4:21 AM