Debt Settlement News
Read the latest on Debt, Debt Settlement and Debt Repair.
NY Debt-Settlement Agency Charged With Fraud
Associated Press (05/07/13) ;
U.S. Attorney Preet Bharara of the Southern District of New York confirms that debt settlement firm Mission Settlement Agency, its owner Michael Levitis, and three employees have been charged with mail and wire fraud. Federal prosecutors say that although the company advertised debt settlement services, it actually defrauded more than 1,200 debt-ridden individuals out of a total of millions of dollars by lying about its fees. Prosecutors also say that Mission employees lied about the company's debt reduction results.
N.C. AG Announces Court Order Against Debt Settlement Firm
Legal Newsline (04/26/13) ;
North Carolina Attorney General Roy Cooper has secured a court order against Advantage Debt Solutions Inc., a Charlotte-based company that he says was part of an illicit debt relief scheme. The firm allegedly charges consumers upfront fees equal to 15 percent of their total debt but rarely provides any debt relief or refunds customers who cancel the programs and attempt to recoup their money. Consumers in North Carolina, which bars upfront fees for debt settlement services, forked out more than $140,000 to Advantage Debt Solutions, while out-of-state customers paid an estimated $1 million to the company. "Outfits that promise debt relief for an upfront fee most often end up driving consumers even deeper into debt," according to Cooper. "Thanks to North Carolina's strong laws, we're able to take action to stop these harmful schemes." A judge's order upholds Cooper's request to temporarily prevent Advantage Debt Solutions and its owner, Anthony Krysinski, from offering debt negotiation or adjustment services in the state. The AG hopes to permanently end these activities and win refunds for affected consumers as part of a lawsuit against the company and its owner.
More Americans Debt-Free, But the Rest Owe More
USA Today (03/22/13) ;
Although the share of U.S. households carrying debt fell from 74 percent to 69 percent between 2000 and 2011, the median debt load climbed from an inflation-adjusted $50,971 to $70,000 over the same period, the Census Bureau reports. According to the bureau, the largest debt spike was for households led by people 35 to 44 years old, who owed a median of $108,000. There also was a doubling of the amount of debt owed by seniors to a median of $26,000, and this group's housing debt led the boost in their overall debt load, the government reported. "We've known for five-plus years that seniors are falling into debt, and it's very troubling," said personal finance expert Lynnette Khalfani-Cox. "Most of us have this idealized concept of riding into the sunset with a paid-off house. Unfortunately, that isn't the case." The volume of unsecured debt like student loans and uninsured medical costs rose to 19 percent from 11 percent -- led by people under age 45 -- but far fewer Americans today have credit card debt. Just over 50 percent had credit card bills early last decade compared to 38 percent now.
Debt-Settlement Bill Shelved for Now (GA)
Atlanta Journal-Constitution (03/04/13) ;
Debt settlement companies are trying to set up shop in Georgia, but the state House banking committee defeated a bill that would permit the companies to operate there. HB 465 may be revived and presented in the state Senate or be attached to another bill. Lead sponsor Rep. Chuck Martin (R-Alpharetta) argued that the measure would help consumers by giving them alternatives to bankruptcy. Many consumer advocates, however, counter that debt settlement firms charge high fees and often fail to protect consumers from creditor lawsuits, wage garnishment, or harassment from collectors. HB 465 would require that companies disclose alternative forms of assistance and forbid them from charging for settlement services until the consumer agrees to a plan and makes a first payment toward debt. Critics of the bill would prefer to see a cap on the fees charged by debt settlement companies.
Fla. AG Announces Injunction Against Debt Firms
Legal Newsline (03/04/13) ;
Florida Attorney General Pam Bondi recently announced a temporary injunction and asset freeze against the debt collection companies Vanderbilt & Associates LLC and Buchanan Capital Management LLC as well as their owner, Merrill Miller. The businesses allegedly engaged in illegal debt collection schemes, including masquerading as process servers, government agents, law enforcement officials, or county clerk’s office employees in order to intimidate consumers into paying debts. The alleged practices often targeted debts that had been paid, were nonexistent, or that the company had no legal right to pursue for collection. The allegations violate the Florida Consumer Collection Practices Act and the Florida Unfair and Deceptive Trade Practices Act.
When Bill Collectors Knock
Wall Street Journal (02/08/13) ; Blumenthal, Karen
Some 30 million Americans have an average $1,500 of debts in collection, according to estimates by the Consumer Financial Protection Bureau. Debt buyers pay an average of only four cents on the dollar, and they often aggressively pursue the debtors without proper documentation of the accounts. Third-party debt collectors generated 155,640 complaints to the Federal Trade Commission (FTC) in 2011, up from 96,102 in 2009. Individuals targeted by collectors should talk to the lender as soon as possible to work out a plan to keep the debt current. Nonprofit credit-counseling firms may also provide help, such as working with consumers on a budget and helping negotiate repayment plans. False threats and harassment are illegal; borrowers can request in writing that collectors stop contacting them. However, this will not resolve the debt; and a collector could still take the debtor to court. Keeping detailed records can help borrowers if they are sued; and if they are not sure the debt is theirs, they should dispute the debt within 30 days of being notified. The FTC reports that debt buyers often do not share relevant information with consumers about the debts they purchased, such as the original lender or the date of the last payment. About 1 million debts per year are disputed. If they dispute the debt or go to court, debtors should negotiate, get the results in writing, and understand the relevant laws in their state.
Bill Would Tighten Regulations for Debt Settlement Companies
KOMO News (WA) (02/05/13) ; Thompson, Connie
In Washington state, the Debt Adjuster Bill proposes to limit the fees that for-profit debt settlement firms can charge customers each month. Non-profit companies may ask for $20 to $40 in monthly fees to defray the cost of running a business; while for-profit operations demand $60, $100, or more each month--but rarely follow through on promises to negotiate borrowers' balances and slash their total debt. Under House Bill 1491, a cap on monthly fees would be put in place. Additionally, debt adjusters would have to be non-profit, provide a copy of the signed contract plus signed statements revealing how much the customer paid each month and how those funds were distributed, and undergo annual audits. Consumer advocates hope the measure will shield thousands of state residents from predators who are more interested in making money than in helping them. "If this passes in some form or another, you're going to see a lot of for-profit debt settlement companies pull up stakes, and leave Washington," speculates Bruce McClary of Clearpoint Credit Counseling.
Colorado Attorney General Settles With Debt-Management Firm
Denver Business Journal (02/04/13) ; Draper, Heather
The Colorado attorney general’s office has reached a settlement with Westminster debt-settlement company Prestige Financial Solutions Inc. and its owner, Amy Thompson. Prestige allegedly failed to meet the state's consumer-protection regulatory requirements. In January 2012, the AG's office accused it of providing debt-management services to Colorado consumers without providing mandatory consumer disclosures, cancellation notices, and Web site information. Prestige “may have entered into contracts with at least 720 Colorado consumers,” estimated AG John Suthers. Colorado clients of the firm may keep receiving Prestige’s services free of charge or terminate the services and receive a full refund of their trust account balances. Prestige and Thompson also are permanently banned from providing debt-management services for a fee to Colorado residents; and they must pay $165,000 for consumer restitution, reimbursement of legal costs, and educational purposes.
CFPB and State AGs Win First Case Against Debt Settlement Firm
American Banker (12/24/12) ; Witkowski, Rachel
A Florida debt settlement firm has been called to task for illegally charging upfront fees for services never rendered. Under order from a federal district court, Payday Loan Debt Solution Inc. will refund up to $100,000 to consumers in Hawaii, New Mexico, North Carolina, North Dakota, and Wisconsin. The settlement also stipulates that it pay a $5,000 fine to the Consumer Financial Protection Bureau's Civil Penalty Fund. "This action is part of the CFPB's comprehensive effort to prevent consumer harm in the debt-relief industry," according to a press release from the regulator. "The bureau is working to ensure federal consumer laws are being followed at every stage of the process and is focusing not only on debt-relief service providers, but also on their partners, including those who facilitate their unlawful conduct and who may also violate federal consumer financial laws."
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Drowning in Debt? Don’t Fall Prey to a 'Get Debt-Free' Scheme
nwitimes.com (12/22/12) ; Bora, Madhusmita
Debt settlement scams are the leading threat that indebted Americans face, according to the National Association of Consumer Bankruptcy Attorneys (NACBA). Only about one in 10 consumers who enroll in debt settlement plans are actually rid of the debt in the promised time frame. Struggling consumers may be easy targets for scams. “People pay $6,000 to $8,000 to these companies before they get any results,” says NACBA's Ed Boltz. “By the time they realize, they are deeper in debt, and their credit’s ruined.” Consumers can avoid most scams by shunning companies that request fees up front. Debtors with a little extra cash on hand could try to negotiate with creditors directly to reduce debt. Information available on the Internet can probably reveal whether a company has been fined, recently went through a large settlement, or has a bad rating with the Better Business Bureau. A local attorney or government-approved nonprofit credit counseling agency also may be able to help determine debt settlement options.
Maine Settles With Debt Management Companies
Maine Public Broadcasting Network (12/18/12) ;
The state of Maine has settled with two Chicago-based companies, The Mortgage Law Group and Legal Helpers Debt Resolution, accused of misleading consumers about their debt-management services. Maine Attorney General William Schneider says the companies deceived consumers about the benefits of their programs. The attorney general's office and the Bureau of Consumer Credit Protection contend The Mortgage Law Group and Legal Helpers Debt Resolution did not have offices in Maine, but had established partnerships with attorneys licensed in the state. In the settlement, the firms agreed not to enroll any more Maine consumers in their programs and to stop charging monthly fees to those still enrolled. They also paid $250,000 in restitution to be distributed to 300 Maine consumers and paid $15,000 to reimburse the state for investigative and administrative costs.
Who Should You Ask for Help? Credit Card Companies or Credit Counselors?
Fox Business (11/12/12) ; Andrew, Peter
According to ACA International, 30 million Americans had accounts under debt collection in October; but critics say many of the claims are sketchy. A recent report by the National Association of Consumer Bankruptcy Attorneys said that half a million Americans are now participating in debt settlement programs but that as few as 10 percent of them are likely to emerge with a successful outcome. For those included in the "under collection" group, it may be too late to make a deal with credit card companies; but this is an option for borrowers who have only recently had trouble with their bills. Experts say trying to negotiate with credit card issuers should come before allowing the debt to fall into the hands of a debt collector. But experts warn that if a consumer's debt is so large that he or she is unable to make required payments, the next step should be seeking the help of a reputable credit counseling organization. Personal bankruptcy should always be a last resort to stop harassing phone calls from debt collectors and lawsuits that typically follow.
Consumer Group Criticizes Debt Settlement Firms in DOJ Letter
American Banker (10/31/12) ; Davidson, Kate
Debt relief firms do not achieve the promised results for most customers and often leave them in an even more precarious financial situation, the Center for Responsible Lending wrote in a letter sent to the Justice Department, Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, and Federal Trade Commission. For a fee, the companies offer to settle customer debt for significantly less than the principal; but CRL says they often tell borrowers to cease payments and communication with creditors. "Requiring clients to default on their obligations to third parties, without any assurance of the third parties' cooperation, is debt settlement's central flaw," CRL senior counsel Ellen Harnick wrote. "Debt settlement exploits the desperation of financially strained families, and typically leaves them worse off than they were when they started." In fact, according to CRL, some credit card companies and debt collectors refuse to negotiate with debt settlers; and some even accelerate their collection campaign once the borrower enrolls in debt settlement.
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There's No Fast, Easy Way to Get Out of Debt
Boston Globe (10/21/12) ; Singletary, Michelle
Borrowers often seek a magic bullet to get out of debt, and many turn to debt settlement companies to help solve their problems. While many of these firms make a pitch to quickly resolve debt issues, the fine print can leave customers still paying, including fees, up to 75 percent of what they owe. According to the National Association of Consumer Bankruptcy Attorneys, only about one in 10 consumers participating in debt-settlement programs actually end up debt-free in the promised period of time. "These companies prey on the most desperate victims of the economic downturn," said Ed Boltz, the group's incoming president. "These particularly vulnerable consumers usually end up getting sued, stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score." Boltz added that one of the biggest problems with such programs is that they encourage consumers to default on their debts.
WV Attorney General Reclaims Canceled Debts, Refunds
WOWK-TV 13 (WV) (08/17/12) ; Autler, Alanna
As an effort to protect West Virginia consumers from illegal debt collection, Attorney General Darrell McGraw reached an accord with collector DP & Associates of Irvine, Calif., in which the company agrees to pay $1.7 million in refunds and canceled debts. Under the "assurance of Discontinuance," DP agreed to close all West Virginia accounts with a zero balance, tell credit reporting bureaus to delete references to the debts, refund all collected sums, and report any judgments obtained against the state's consumers. The deal canceled the debts of about 124 West Virginians.
Sacramento Federal Court's Debt-Collection Ruling Reversed on Appeal
Sacramento Bee (08/02/12) ; Walsh, Denny
On Aug. 1, a split appellate panel reversed a Sacramento federal judge's ruling that favored a debt collector and his questionable collection practices. The panel remanded the case to Sacramento for further proceedings that comply with the appellate opinion. However, it also took the case from U.S. District Judge John A. Mendez due to his dismissive attitude and disparaging remarks toward the attorney who filed it and ordered the Sacramento court to assign a different judge. The panel additionally reversed Mendez's decision not to certify the suit as a class action on behalf of other debtors targeted in the same way. In 2010, Mendez ruled that lawyer Sidney Mickell of Montclair in San Bernardino County did not violate the federal Fair Debt Collection Practices Act when he sent collection letters "in care of" employers without first obtaining permission from the debtor. A majority of the three-judge panel of the Ninth U.S. Circuit Court of Appeals said that the practice carries a high risk of unnecessarily stressing and embarrassing debtors, "precisely what the act is designed to prevent."
CFPB Sues California Law Firm Over Alleged Debt-Relief Scam
American Banker (08/02/12) ; Berry, Kate
The Consumer Financial Protection Bureau (CFPB) recently filed its first civil enforcement order against a Los Angeles law firm that charged homeowners for loan modification services that were never provided. According to the regulator, attorney Chance Gordon, his law firm and two subsidiaries preyed on financially strapped borrowers by promising to lower their monthly mortgage payments in exchange for upfront fees of between $2,500 and $4,500. The CFPB said that after the fee was paid, consumers saw "little, if any, meaningful assistance to modify homeowners' mortgage loans or prevent foreclosure." The July 18 complaint in the U.S. District Court for the Central District of California also asked to halt the firm's operations. The judge granted the request to issue a temporary restraining order against the firm and appointed a receiver to take possession of it and its affiliates. The CFPB joins several other regulators, including the Federal Trade Commission, that are targeting lawyers in debt-relief scams.
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Though Bad Debts Fall, Lawsuits Over Collection Practices Rise
Fox Business (07/20/12) ; Merzer, Martin
Lawsuits filed by credit card customers and other debtors are surging despite a decline in card debt and bankruptcies. According to the Transactional Records Access Clearinghouse, approximately 890 consumer credit lawsuits were filed in May throughout the country -- up 12.4 percent from April. Additionally, nearly three times as many consumer credit lawsuits were filed this May as were filed in May 2007. Many of the cases cite alleged violations of the Fair Debt Collection Practices Act (FDCPA), which regulates the actions of debt collectors; or the Fair Credit Reporting Act (FCRA), which controls the accuracy, privacy, and use of consumer credit reports. While some experts believe the spike may reflect more aggressive filings by litigious consumer attorneys rather than more illegal behavior by debt collectors and reporting agencies -- which have long been accused of using unfair collection methods -- some consumer advocates counter that rogue debt collectors continue to prey on borrowers and that sloppy protocol at some credit agencies also is still having an impact on them. "Some of the most serious violations of [FDCPA] include constant harassing phone calls, overt illegal threats to consumers and continuing to contact the consumer after he or she has requested verification of the debt," notes attorney Jonathan Harris of the Public Justice Center in Baltimore. "Some of the worst violations of the FCRA include the mixing of files between different consumers, allowing negative information to stay on a consumer report after a certain number of years when the law requires it to be removed, failing to correct other inaccuracies when requested by consumers, and not providing proper notification to consumers when using a consumer report."
District Court Dismisses Debt Cases Against Marylanders
Baltimore Sun (07/11/12) ; Hopkins, Jamie Smith
Maryland's District Court has thrown out about 3,600 debt collection lawsuits, worth an estimated $7.8 million in claims, against state residents. Sister companies LVNV, which buys consumer debts, and Resurgent Capital Services, which attempts to collect on them, agreed to drop the litigation as part of a deal to settle allegations of wrongdoing. In light of charges that they were not licensed as debt collectors, that they made inaccurate claims about the size of debts, and that they hired lawyers who filed "false or misleading" documents in lawsuits, LVNV and Resurgent also agreed to pay $1 million to the state and issue $3.8 million in credits to consumers. However, District Court Chief Judge Ben C. Clyburn said that the cases could be filed again later, as they were dismissed without prejudice.
Settlement Reached With Chicago-Based Law Firm That Conducted Consumer Debt Scam
Rock River Times (07/09/12) ;
Illinois Attorney General Lisa Madigan and the state Department of Financial and Professional Regulation have reached a settlement with Chicago-based law firm Legal Helpers Debt Resolution LLC. The accord resolves allegations that the firm unlawfully charged consumers upfront fees to provide debt settlement services. According to the terms, the firm will provide $2.1 million in restitution for Illinois residents who paid for debt settlement services but did not receive meaningful debt reduction. The company also agreed not to accept any new customers in the state. "This company was fronting as a law firm claiming to help consumers reduce their debt, but in reality, their scheme had nothing to do with the practice of law," Madigan said. "I encourage anyone who might have contracted with this firm to call my office’s Consumer Fraud Hotline for more information about how we can help, whether through this settlement or by connecting consumers with legitimate credit counseling agencies." Madigan filed a lawsuit against the firm in March 2011, alleging it unlawfully charged upfront fees to consumers in Bureau, Champaign, Kendall, Will, and Cook counties. Several laws ban companies from charging upfront fees; but the company tried to skirt these laws by using attorneys, who are sometimes exempt from the ban, to act as a front.