You’ve seen the ads, promising to cut your debt in half, that often sound too good to be true.
Debt settlement companies though, are the top fraud concern in New York City for four years in a row, according to the city’s Department of Consumer Affairs.
Commissioner Jonathan Mintz warns that “these fee-based debt settlement services are almost never successful.”
On Tuesday, Mintz issued subpoenas to 15 companies with the most complaints. He said investigators and lawyers will look into promises made to consumers and whether the companies delivered. For those who don’t, “there’ll be consequences.”
The debt settlement companies subpoenaed by DCA are:
America Debt Free, CF Capital Financial Group, Cooperative Credit Union Management, Credit 911, Debt Remedy Advice, Debt Rx USA, LLC, Diamond Financial Group, Global Debt Management, iCorpFunding, Life Coach Inc., New Path Financial, Right Start Financial, Square One Debt Settlement, United Debt Resolution Group, The Resolution Group.
Mintz says the companies often charge a fee up front, ask for money into an account, but never send those funds to your creditors.
The consumer affairs commissioner says sometimes companies appear to be nonprofits, or affiliated with the government, but he says you should always beware. He suggests the following tips for consumers:
•Don’t pay up-front fees. Charging for services before a debt is settled is illegal
•Beware of damage to your credit score and the risk of legal action by your creditors
•Save your paperwork. Consumer affairs says fewer than 1 percent of all debt-settlement companies deliver what they promise.
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2 Responses
Anything that sounds “too good to be true” almost always is.
If one has to fight with a creditor, one should get a lawyer. Given that banks are not in the business of forgiving the loans they made, it is rare they give up enforceable claims unless forced to do so – and for that one needs an attorney. Not only are they trained for that sort of work, they are also much more strictly regulated than almost any other profession (in particular, they are regulated by other lawyers who are anxious to eliminate competition).
Perhaps the frum community needs its own “legal aid” (for other than “frum” issues), but that’s another issue.
I am not familiar with the process, and I am not behind on any payments. But if you are, you might benefit from the following information: I have personally heard from a few of my friends (two to be exact) that ARE behind on payments, that they called up some of their creditors and offered to settle for a fraction of the balance. In one case, the company first offered to accept 60%, but my friend called back another time and spoke to someone else, and they agreed to accept 40%!! I suppose you have to already be in a bad situation where they are calling you every day, so that they must think they are not going to get anything from you. Which is not good for your credit rating… But eliminating 60% of your debt just by making a few phone calls and being persistent is surely worthwhile for those that need it.
Advice: if you are shy, have someone else call for you. One of the friends that accomplished this is a telemarketer/salesman, and probably knows how to talk to people on the phone very well. I doubt that I could get anywhere if I tried the same thing myself. (Maybe for a modest commission, he would call for you? 🙂 )