In a story that would have been just about a presentation to the New York City Council about debt settlement activities comes a glance into the activities of some debt settlement companies to attempt to loophole out of FTC new rules to regulate debt relief activities.
The documents from the meeting say:
Karen S is a 55 year old home attendant living in Brooklyn. When she became temporarily disabled, her credit card debt rose rapidly to over $45,000. Without a plan, she called Credit Counseling Inc., a Florida based non-profit she heard about on the radio. CCI promised to settle her debts in 42 months for about $30,000 provided she pay $586 a month. Unbeknownst to Karen S, the IRS had recently rescinded CCI’s non-profit status. Similarly, Karen had no way of knowing CCI’s website contained many lies, including that it was accredited with the Better Business Bureau. In fact, the BBB had given CCI an “F” because CCI’s advertising was “grossly misleading” and CCl’s customers had “especially serious” complaints. Over the course of a year, CCI pocketed $2,291 in fees fiom Karen S while settling only one small debt. Eventually, Karen S was sued by one creditor with whom CCI was supposedly negotiating. – Source
The documentation also mentions how non-profits may try to evade the FTC Rule.
Bona fide non-profits are not covered by the new FTC rule.“ Debt settlement companies, by and large, are for-profits. However, even before the new F TC rule was enacted, a number of debt settlers disguised themselves as “do good” non-profits. These include Credit Counseling Inc, of Sumrise, Florida and New Life Debt Relief Corp of California.
How bad can these non-profits be? Karen S, mentioned above, lost $2,291 to the supposed non-profit, Consumer Counseling Inc. And then there is the National Consumer Council (NCC), a purported nonprofit. In 2005, the FTC audited NCC’s records to determine how many of its 44,844 customers benefitted from debt settlement. The answer was less than two percent (only 638 customers.) The rest lost money and were substantially worse-off financially than before they signed-up.
The documents also name Morgan Drexen, Mission Settlement Agency, Eric Rosen, National Consumer Council, New Life Debt Relief Corp, Debt Relief USA, Debt Rescue Corp, EMD Debt Settlement, Alpha Settlement, and Nationwide Credit Solutions.
New York City Bar testimony at meeting. – Source
Committee Report of the Governmental Affairs Division – Source
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