Debt Relief Firm Defrauds Debtor

Dave was $23,000 in the debt hole. He had a wife, a 6-month old daughter, a Masters in Advertising, and a dead-end waitering job. Then he heard an ad on the radio for a “debt relief law firm” that promised to solve all his problems. “Looking back, it was so stupid to agree to any of this,” writes Dave. “I still beat myself up about it and we were lucky to find out everything was falling apart when we did.” Here’s what went wrong:

Dave writes, “The deal was supposedly simple. We listed their office as the contact information for the credit card so we would stop receiving past due calls. The firm would automatically withdraw $450/month to be paid to the credit card under the agreement that was arranged between them and the bank. We would receive monthly confirmations of payments being made.

After signing up for the program, we moved to Atlanta for better job opportunities. We were staying with friends while we found a place to live. We needed an apartment and we needed to get health insurance. I had managed to put aside $800 for the first month’s premium and a deposit for a Blue Cross policy. I was waiting tables and was also putting aside money for first and last month’s rent at the apartment complex where we wanted to live. The apartment folks told us that they had to pull a credit report as part of the application process. No problem. I called the law firm to let them know that the apartment people were going to pull a report and not to be alarmed as one of our rules was not to apply for any new credit while we were in the program.

Instead, I got a pre-recorded message from them when I called that said they had been forced into involuntary bankruptcy due to fraudulent business practices. I immediately called the bank through which we had the credit card and they confirmed my worst nightmare: they hadn’t actually received a single payment from the law firm in 5 1/2 months. The account was set to charge off that Friday, and it was Tuesday that I called. I had to send them the money I set aside for health insurance and rent to keep the charge off from happening.

Our friends were very gracious and understanding. We stayed with them for another month and eventually got everything straight. But the law firm is still entangled in a civil cases and asset sell offs. We lost a few thousand. Others lost way more, so we’re pretty far down the list and don’t expect to ever see a dime of it back.”

There’s nothing these debt relief/consolidation/settlement places can legally do for you that you can’t do on your own. If you really feel you need the help of a professional, find a non-profit credit counselor through nfcc.org

(Photo: Getty)

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  1. Toof_75_75 says:

    Ouch…That sucks. Good luck with everything!

  2. dragonfire81 says:

    You know I have thought about using one of these places since I am trying to get out of a debt hole but I’ve seen many stories like this and I can’t help but be way of them.

    On another note: He has a MASTERS in advertising but he’s waiting tables? I didn’t realize the job market was that rough.

    • Spin359 says:

      @dragonfire81:
      Advertising

    • Toof_75_75 says:

      @dragonfire81:
      Well, to be fair, that’s not completely a sign of the job market…I could have a PhD in Underwater Basket Weaving and not really be able to find a high paying job in my field…I assume his BS is in Business, which is pretty open ended (and, no offense, kind of “run-of-the-mill”) and I assume advertising could be a tough industry to just step into a high-paying job, especially with retail sales down-turning the way they are, businesses just don’t have the marketing/advertising budget they might be used to.

      • FatalisticDread says:

        @Toof_75_75: I didn’t know anyone else ever referenced “Underwater Basket Weaving.” I think I picked it up from my mom, which makes it possibly 50yrs old or more. It made me laugh!

        • TechnoDestructo says:

          @FatalisticDread:

          On the subject of underwater basket weaving…come to think of it that would be an excellent way of weaving a basket. The fibers should shrink and harden as they dry out.

          • lordargent says:

            @TechnoDestructo: On the subject of underwater basket weaving…come to think of it that would be an excellent way of weaving a basket. The fibers should shrink and harden as they dry out.

            I’ve heard the term for at least 15 or so years.

            Anyway [en.wikipedia.org]

          • D-Bo says:

            @TechnoDestructo: I did underwater basket weaving sitting in a mountain lake at Boy Scout camp as a kid. It works well for the reasons you stated as well as the increased pliability of the materials while submerged.

        • Toof_75_75 says:

          @FatalisticDread: My wife’s parents always say it, which is where I heard it originally. Her (my wife’s) mom actually does weave baskets and has even taught classes on how to weave them, though I don’t know that she’s made her way into the underwater variety… LOL

          On the topic of majors…Did anyone else, when trying to decide what they should study after they graduated high school, take into account how lucrative their major could be? At least for me, a large amount of my consideration was based around the amount of money I could make. I took the approach of…”I am good at science, computers & math and am generally interested in things related to that. What fields could yield me the highest return?” You can see how I ended up becoming an Electrical Engineer… :-)

          • HogwartsAlum says:

            @Toof_75_75:

            I have a Bachelors in English and an Associate in Criminology. Both are worthless.

            Masters in Education is also a waste of money. I didn’t find out until two years in that I would need the Masters in my SUBJECT, which my university doesn’t even offer. Thanks, suckwads. I’m out after this semester.

        • dtmoulton says:

          @FatalisticDread: I thought the same thing but at work. Weird.

      • vumastr says:

        @Toof_75_75: Agreed. There are available jobs in advertising, but they typically are looking for a strong portfolio, a deep customer base or excellent hands-on experience. The masters may not be of much use in getting a foot in the door.

        • katylostherart says:

          @vumastr:
          @Toof_75_75:

          he could still be doing a lot better than waiting tables with a masters degree. unless he’s only looking at jobs in that one field it is a pretty bad sign about the job market.

          • Toof_75_75 says:

            @katylostherart:
            Just b/c you have a Master’s doesn’t mean you automatically get a job…As I mentioned, a B.A. in Business is pretty easy to come by and a while a Master’s in Advertising is certainly an accomplishment, it just isn’t a field that is in high demand right now. Depending on the restaurant, waiting tables really could be the highest paying job option for him, especially if he had just moved and had to take whatever opportunity he was given on short notice. As another commenter noted, perhaps he is just in the wrong area looking to do advertising and he would need to move to find greener pastures if he wants to work in his field. While the job market may not be exploding with new opportunities for every field, I don’t think this story is an indication of a dying/dead market.

      • BlondeGrlz says:

        @Toof_75_75: I started in Underwater Basket Weaving but switched to Communications my junior year. I wish I’d stuck with it, my job prospects would probably be better. I was just so tired of having pruney fingers!

        • Toof_75_75 says:

          @BlondeGrlz: Yeah, I imagine you almost immediately regretted the decision. It’s tough though; Underwater Basket Weaving is one of those majors that is easy to start your college career in, but almost impossible to break into once you’ve already started another major. It’s mostly due to the wildly demanding curriculum.

          @HogwartsAlum: It really is unfortunate how many majors there are that really offer no financial future. I have several friends who have become teachers or social workers and are angry that their salaries aren’t very high…It sucks for them, but at the same time, I have to wonder what they were expecting. Most jobs in teaching, human services, etc. really have to be done for the love of the job, not for overwhelming financial well-being (Underwater Basket Weaving, obviously excluded).

    • rattis says:

      @dragonfire81: I have a friend that has a Masters in Marketing, and worked for Microsoft as a contractor for several years. She spent most of this year unemployed, and recently had to move to Az from Mi for a job.

    • ChuckECheese says:

      @dragonfire81: NOOOOOOOOOO! Don’t use these services. I have a master’s too, and I’m currently working for one of these debt settlement places as a temp. It’s hilarious! Today one of the client accounts I worked on is an ACCOUNTANT. And yes, the job market is that rough in many places right now. The larges Fingerhut balance I’ve found to date is over $2000. For halloween, I’m going as a maxed-out credit card!

  3. ucdcsteve says:

    Here here. And congrats on being able to climb out of the hole they put you in to right the ship.

  4. Crymson_77 says:

    I tried Profina long ago. They didn’t steal my money, but they sure stole my time and credit report. I dropped them, disconnected any communication with them, and started doing the job myself like I should had done long ago. Avoid these places/firms/asshats like the Black Plague.

    • kc2idf says:

      @Crymson_77: I have used a non-profit credit consolidation service to good effect. Of course, one can be a non-profit and still be crooked, so you need to do your research.

      In particular, the one I used did not have all communications from my creditors moved to them. I continued to receive every statement from every creditor and could confirm for myself that the amounts they were being paid were matched for what the service said was being paid.

      Now, about what you can do versus what one of these services can do . . . I tried to negotiate lower interest rates on all of my accounts and was stonewalled by all of the creditors. The service, on the other hand, was able to get all but one creditor to lower their rates (the one who refused, by the way, was Sears. Go figure). They even got one creditor (HSBC) to go to 0% until payoff.

      My only complaint is that the service I used is in hurricane territory, and so I get a notice every once in a while during hurricane season that a payment was late or missed. With one exception, these have cleared up with no effort on my part.

  5. Jevia says:

    I used CCS many years ago to try and get out of debt (which didn’t work, but that’s another story). They did a similar thing, you pay them one check, they then pay your creditors with it. I still got monthly statements from my creditors. While I sympathize with the poster, didn’t he still receive his monthly card statements, which would have shown no payments being made?

    Or did they ‘change the address’ for where the statements were to be mailed (which, imo, would have been a huge red flag).

    • ganzhimself says:

      @Jevia: I’m using CCCS to pay back my debts… I went way overboard on the credit cards when I was a foolish undergrad. They were able to get the creditors to stop harassing me, and I have been paying a very reasonable amount (compared to what I was paying) each month to pay off my debt. I get all my statements in the mail and really, I don’t do anything other than update them as to what the actual balances are every few months. They directly debit my checking account every month and they haven’t ever missed paying any of the accounts. My interest rates were cut (in most cases) in half or better, and I can’t fall back into the hole I was in because all the accounts are frozen. Yes, my credit score does suck, but I really don’t care right now. Honestly, it was probably the best decision I made, because without it my FICO would be completely in the toilet. I’m still not proud of my FICO, but it’s much higher than if had just abandoned paying and ignored the collections notices.

      • Jubilance22 says:

        @ganzhimself: My mom used CCCS to pay off her credit card debit, and now she highly recommends them. They helped her with getting the interest rates down, and she also did the direct debit thing.

        CCCS is probably the only legit debt counseling folks out there. But I would never call one of those groups on tv, you know its a scam just from the slick advertising.

        • ganzhimself says:

          @Jubilance22: It took me a long time to go with it, because I haven’t ever heard anything good about debt consolidation. Lots of research turned up positive reviews of CCCS and they really sold me on it with all the help they gave me in getting a manageable rate with my creditors. It IS a service and I do pay them a small fee every month, but it is well worth it since I don’t have to do anything other than make sure that the payments are getting applied to my account by checking my statements. My credit score is actually HIGHER than before I went into the program, something I didn’t really expect.

        • hapless says:

          Locally, I see tons of really creepy TV ads for CCCS. I always figured they were a scam of some kind.

    • Jevia says:

      @Jevia:

      As I mentioned in response to another poster below, looks like each individual CCCS office can be good or bad. Mine was bad. All it did was push me into bankruptcy. That was over 10 years ago (yay, finally off my credit report!), so maybe they’ve improved.

  6. ssaoi says:

    Debt consolidation works like this:

    1. You stop paying your debts. If you have a good credit score, the companies and banks are much less likely to deal with you.

    2. You start paying consolidators. They are taking the money and paying themselves and “supposedly” building up your payment fund.

    3. Once your credit rating is in the toilet, the consolidators approach the banks and company to negotiate a 40% repayment.

    4. The consolidators start making the payments on the new schedule.

    5. Everybody wins!

    It’s much harder for people to negotiate a 40% repayment by themselves. They instead arrange the deals using hundreds of people’s accounts. It’s not even a negotiation really. It’s a pretty well established rate.

    I personally would never use one of the these companies, because I don’t want to watch my score go down to 500. Just understand that every single debt consolidation works exactly like this. Your fico will be a wreck and there is a chance they will never start paying on your debt.

    • ChuckECheese says:

      @ssaoi: Your post is essentially correct. However, lately some companies (cough cough Target) are holding out for very high percentages (over 80%). What happens then is that Target gets added to the list of creditors “we don’t work with.”

  7. LatherRinseRepeat says:

    I was under the impression that ALL “debt consolidation” services were a scam. They’re basically a kinder and gentler version of the typical debt collectors that harass you day and night. All they really do is negotiate and buy your debt from collections agencies and banks, and work out a payment system with you.

    This is something you can do on your own. If you find yourself in a financial hole, contact the bank directly and work something out before they send your account to collections. In some cases, they might even forgive a certain percentage of the debt and let you pay whatever you can.

    • VigilanteKitteh says:

      @LatherRinseRepeat: This is true. I was in a similar situation this year (a debt re-appeared, I thought it had been paid off, but it wasn’t), and I thought I was screwed. The threatening letter from the collection agency sent me overboard, and the lady kept harrassing me. I saw an ad for a debt consolidation place, that says that they’ll handle all the issues with the creditors, and I would just have to pay them once a month, and not be stressed. I went in for a consultation, and the lady said that I had to file bankruptcy. Umm, no! There was no way in hell that I’d do that. To stop the collector from calling me, I sent her a letter, authorizing my boyfriend to speak with her, on my behalf. He worked things out with her, and now, the debt is halfway paid off, and I didn’t have to screw up my credit for years to come. I mean, all my other bills and debts are under control, I have good credit, but she wanted me to file bankruptcy over this ONE debt. How stupid.
      As I mentioned,it was the harrassment that I couldn’t take, and we figured out a solution to that. These companies only want to screw you over. I would have had to pay 2000$ for bankruptcy to this company, and be screwed for life, vs. paying the 3000$ debt…I’d rather do the latter, thanks.

      • VigilanteKitteh says:

        @VigilanteKitteh: I use online banking to view the cheques that I sent them, so that I know that they’re paid for sure. Collectors like to say that the cheques weren’t sent/bounced/whatever. They once withdrew a cheque dated for July, at the beginning of June! Thankfully, my Canadian bank protects me against this sort of thing :P
        Working out a payment plan with a creditor is the best strategy.

  8. Brazell says:

    Man that sucks.

  9. aliasmisskat says:

    I worked with Consumer Credit Counseling Services (CCCS), a division of Family Services, Inc., a few years ago. I highly recommend them to anyone looking for someone to help manage debt, for several reasons:

    1) They’re local. They are located within Family Services, so you can walk in or call, and usually be able to speak to a real person immediately (occasionally a counselor is out of the office).

    2) They don’t promise a quick fix. They offer budgeting and credit classes, and help organize payments to all your creditors.

    3) They may not be able to negotiate a 40% reduction in debt, but they usually can get the credit card company to stop charging interest, and reduce the debt at least a little.

    Basically, you give them one check a month, and they farm out the money to all your creditors. You pay a fee for them sending out the checks, but they start immediately, don’t require a ridiculous amount up front, and will give you copies of checks when one of the creditor inevitably claims they didn’t receive payment. For the more absent-minded of us (me), this was a perfect solution.

    • Jevia says:

      @aliasmisskat: I guess each local CCCS is different, the one I used was crap. Couldn’t negotiate their way out of a handbasket, only about half of my credit cards agreed to lower their interest rates. I had one credit company charging me a late fee every month because CCCS wouldn’t pay the minimum amount due (because that creditor refused to lower the interest rate). They just told me that when it was that card’s ‘turn’ to be the ‘main paid-off’ card, they’d increase their payment. Alternatively, I could make my own ‘extra payments’ to that card.

      CCCS actually wanted me to pay more each month than i had been when I was making my minimum payments myself. Their solution as to where I was supposed to come up with this ‘extra money’ that I didn’t have which is why I turned to them in the first place? Turn my home office into a bedroom for a renter. Yeah, I want to rent a room in my house to a stranger with my young kids. I don’t think so.

      • aliasmisskat says:

        @Jevia: okay, yeah, that is crap. The one here is pretty awesome, but then, the entire staff of Family Services here is awesome. The court uses our local CCCS for money management classes required for pre-trial deferment for check deception charges.

  10. madfrog says:

    I did my debt repayment with AFS starting a few years back and they are legit. You pay back your debt, but they negotiate a better interest rate for you. The calls stop and I am on the phone with them at least once a month to make sure there are no problems. I will be debt free in about 1 1/2 years, and it was worth it. They only charge me $50 a month to handle this, and once a year they waive the fee. Best thing I ever did, and the credit report shows that I am working with them to repay the amount. So, if you are serious and what something legit check out AFS.com

  11. consumerlawyer says:

    I’m not sure what state this guy is in, but if this was a legitimate law firm, he can contact his state’s bar association to file a complaint, and will most likely get some of his money refunded through the bar association’s IOLA fund, which is a fund set aside specifically to reimburse cleints for the unscrupulous acts of certain lawyers.

  12. daveforamerica says:

    I agree, contact the banks themselves. Most have an in-house program that will work out better than anything a third party can arrange.

    Contact the bank, explain your situation, and especially in this financial climate they will work with you so you’ll pay them something rather than just default.

  13. AustinTXProgrammer says:

    If you are in the position where you need this, talk to a consumer credit attorney (not the same as a bankruptcy attorney).

    They can do the same thing, and you can keep the money in your accounts in the interim.

    You might have to take a few more calls, but you will save a fortune.

    • fancyxamy says:

      are you talking about “attorneys” that will “negotiate” with credit card companies? because i work at a bankruptcy attorney firm and sooo many of our clients turn to bankruptcy after getting screwed by these guys.

      based on what ive seen CCCS can be really helpful, although mostly for smaller amounts and not when it comes to bigger stuff like IRS debt. they get interest rates down, are legit about destributing money to creditors and charge a VERY small fee per month. we recommend them because they also offer 2 credit counseling services which are mandatory for both Chapter 7 and 13 clients to complete in order to get a legal discharge of their debts.

  14. thatsnotfab says:

    There are legitimate debt management programs out there, if Dave is interested… I’ve been using Consolidated Credit Counseling Services.

    I’ve been using them since June, and everything’s been great. I pay them one payment at the beginning of the month and then they distribute the appropriate amounts to all of my creditors (Yes, they really do- I check my statements every month).

    Basically, they got all my creditors to agree to lowering my APRs. You may be able to negotiate lower rates on your own, but if not, try Consolidated.

    • thatsnotfab says:

      @thatsnotfab: I forgot to add that there is only a $12/month “membership fee” and a $5 fee if you want them to automatically withdraw the money from your account each month. There is also a one-time $45 (or was it $49?) start-up fee.

  15. Landru says:

    CCCS and many of the other credit counsling services might be their own companies and subjet to failure, they do receive funding and organizational help from the credit card lenders. They may help you (and actually I went through one to pay off my debts) but they are more beholden to the credit card companies than to you.

  16. xspook says:

    College doesn’t buy common sense.

  17. Valhawk says:

    As much as this is horrible, its not really new. Fraudulent debt relief services have been around for a while now.

  18. valleygirl_18002 says:

    I’m currently using Federated Financial to pay off my debts. Granted, I had not fallen behind when I signed up, but they’ve been pretty good. My credit score hasn’t tanked (I have a subscription service from my CU) and it’s helped me in sticking with a monthly budget because I know that payment comes out every month much like my car payment.

  19. EudoraMilda says:

    I am using Money Management Int’l, a non-profit that I recommend highly. Yes, you can do most of this on your own, but when I started with them, I really didn’t understand much of what I do now. They negotiated lower interest rates, and redistribute payments. I had to personally call my credit card companies to tell them I was entering debt management, etc. I receive monthly statement from all parties confirming my payments. Their service has honestly changed my life, I am thisclose to finally paying off almost 15,000 in out of control credit card debt.

  20. RobinB says:

    Having been underwriting and processing mortgages for 23 years–I will throw out a warning that seeing CCCS on a consumer’s credit report typically is a reason for rejection. Just a heads-up.

    • AmbiUbi says:

      @RobinB: Good advice…I remember in 2004 I looked at CCCS for our 40K in CC debt…talked to some friends in the mortgage business, and was told that it looked just as bad on a report as a bk…so we went ahead with the bk instead and had NO debt to pay back. Best thing we ever did.

      Of course, bk law changes in 2005 went into effect and I don’t think it would be as easy anymore as it was for us…

    • HolbrookHaermm says:

      @RobinB: I was going to say them same thing about CCCS. I have heard they’re a great organization but – I am in the residential real estate business and mortgage companies see CCCS as a big red flag – so think twice if you’re thinkiing of buying a home.
      Trish

  21. NadiaIshbob says:

    I used A New Horizon which is a credit card counseling service in Florida. Paid off $30k in 5 years. Debt free now with my credit score well into the 700′s. Never had any problem with this company. In fact, they had the best customer service of any company I have ever dealt with.

  22. Luckwouldhaveit says:

    The letter writer (and anyone else who feels he was “scammed” by a credit counseling law firm) should make a formal complaint to the Bar Association of their home state. Assuming this firm was at least legitimate enough to be operating in a state in which one of its attorneys was a member of the bar, that attorney may be disciplined, and the damage claim of the letter writer may be eligible for payment through a fund set up to compensate victims of lawyer malpractice and malfeasance. It may take years, but it’s possible he will be compensated something, and the attorney in question will be barred from practicing again.*

    *Even in another state – bar associations report attorney discipline to each other, so an attorney barred in multiple states who is disciplined in one, will likely find himself investigated and disciplined in every other state where he is a member of the bar.

    • MarcusZoso says:

      @Luckwouldhaveit:
      Just a little addendum: it’s not the bar association who handles complaints about attorneys, but (usually) a branch of the state Supreme Court. The bar association is a private organization for which membership is optional. All attorneys practicing in a state have to be licensed by the Supreme Court for that state.

    • ChuckECheese says:

      @Luckwouldhaveit: This comment is late, but I was surprised, and you very well may be too, to learn that in most states debt settlement companies can operate without attorneys. Complaints have to be made to the consumer affairs office for instance. The firm I work at settles all complaints quickly I’ve noticed, by refunding all fees. They aren’t going to lose their reputation over a few thousand bucks.

  23. Parting says:

    Get yourself a voice mail service, and report its number as your phone number. For 7$ a month, you avoid calls, and you can call them back anytime it suites you, to arrange payments.

  24. MyPetFly says:

    Never ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, use those debt consolidation companies. We used one, and pretty much the same as everyone else, they made payments late, costing us more late fees, they charged fees out the ying yang, etc., and it actually was counterproductive in the long run.

    REPEAT: Never ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, use those debt consolidation companies.

  25. van_line says:

    My story, found a random non-profit organization off the internet. They didn’t charge me anything and they were able to get my interest rates down below 10% and a couple to 0%, when they were averaging 28%.

    I sent them one check each month and I still received my monthly statements and paid off my debt in 8 months.

  26. SunitaAmphimachus says:

    THIS ARTICLE IS CREDIT CARD COMPANY PROPAGANDA. YOU CAN TELL FROM THIS QUOTE:

    “There’s nothing these debt relief/consolidation/settlement places can legally do for you that you can’t do on your own. If you really feel you need the help of a professional, find a non-profit credit counselor through nfcc.org”

    EVERYBODY KNOWS THAT CCCS IS A WORTHLESS SERVICE WITH THE CREDIT CARD COMPANIES RUNNING THEM. CCCS HAS A 90% FAILURE RATE AND IS JUST AS BAD AS BUNKRUPTCY ON A CREDIT REPORT.

    THAT FACT IS, OVER 10,000 SUCCESSFUL DEBT SETTLEMENTS ARE ACCOMPLISHED EVERY MONTH. SOMETHING THE CREDIT CARD COMPANIES DO NOT WANT CONSUMERS TO KNOW!

  27. krunk4ever says:

    I was curious if they were still deducting your $400/mo AFTER they decided to stop paying your bill (5.5 months ago). If that is the cause, isn’t this fraud?!