As the American economy took a dramatic turn for the worse in 2008, there was a marked increase in the duplicity of some business people. These people were able to prey on those in the most desperate need if financial assistance. Each had its own approach to getting money out of consumers and placing them in an even worse financial position.
1) Some companies made promises and then provided little or no service whatsoever to consumer. Companies such as Ameridebt promised reduced interest rates through “consumer credit counselling” programs but failed to provide much service at all. Such companies “sweet talk” consumers to get a payment or two out of consumers then disappear altogether, leaving consumers with worse credit, more debt, and less money as a result of the money taken which also disappeared. You can read up more on the FTC ruling here at http://www.ftc.gov/opa/2006/09/nationwide.shtm.
2) Other debt help providers failed to give the full truth of their services. These companies failed to disclose or simply lied about the downsides of debt settlement such as: creditor calls, potential of lawsuit, credit damage, and the fact that the amount owed to creditors while in the program increases over time. By failing to give the whole truth to their clients these companies were subject to massive fines by the FTC. You can read about these here http://www.ftc.gov/opa/2008/09/nss.shtm
3) A third type of scam found during 2008 was a classic “bait and switch” scenario. Debt settlement firms advertised themselves as consumer credit counselling companies and then sold callers on the debt settlement programs. In West Virginia it turned out that the debt settlement company themselves was ran by a law firm which did not even have a license to operate in that state. The state of West Virginia fined these companies and disallowed them from operating in that state. More can be read about this here: http://www.wvago.gov/press.cfm?fx=more&ID=446
4) Other companies operated in violation of state laws. State laws vary from a complete lack of regulation up to setting regulations which make the debt programs essentially illegal in that state. Georgia is well known as a very strict regulator of debt settlement companies. In 2008 Georgia fined several businesses operating there for violation of state fee caps and other state regulations. These businesses wee also forced to stop operating in the State of Georgia until they complied with State law. More can be read about these cases here: http://consumer.georgia.gov/00/press/detail/0,2668,5426814_94800056_
135944239,00.html
How can consumers prevent being swallowed up into a debt help scam. Several steps should be taken. First, figure out exactly what you are signing up for. Read the contracts. Ask questions. Second- research the company. Check with the BBB and look online on sites such as www.ripoffreport.com. Make sure they have a physical address and a website. Be sure they don’t only answer the phone when they are looking for money from you. Third- pay attention to what is happening/ See if there is a big difference between promises and reality.
One should keep an open mind about these matters as both good and bad exist in all industries. Tens of thousands of people are in fact helped by debt help companies each year. It is up to the consumer to tread carefully and avoid being Taken advantage of. The government can help you also as we have seen. Call with complaints or concerns to the FTC at 1-877-FTC-HELP (1-877-382-4357).
