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.