Debt Relief Industry Sued or Sanctioned

Credit Counseling, Inc. Hit With Georgia Class Action Suit

Credit Counseling, Inc., a Florida company, was hit with a Georgia Class action suit that was just moved to Federal Court. The issue appears to be charging Georgia resident more than the law allows for debt relief services. Alan Silverberg is the president of Credit Counseling, Inc. and is name as a Defendant as well.

At issue is a problem many debt relief companies have blindly ignored, Georgia fees.

The Georgia Debt Adjustment Act requires a number of things but the one most often overlooked is:

“…any charge, fee, contribution, or combination thereof in an amount in excess of 7.5 percent of the amount paid monthly by such debtor to such person for distribution to creditors of such debtor…”

This fee limitation appears to also apply to all providers of service that adjust debts, are engaged in budget counseling, debt management “providing services to debtors in the management of their debts.”

According to the suit, Credit Counseling, Inc. provided debt adjusting and debt settlement services to Kim Gay, a Georgia resident. They represented they would analyze the financial situation and negotiate with her creditors to lower interest rates and the principal amount owed in order to be able to resolve her debts for 40 to 60 cents on the dollar.

The suit also alleges fraud, claiming the Defendants had “no possibility of actually resolving their debts in the manner represented.”

What’s interesting about this case is it brings back up a concept I talked a lot about in the past, fiduciary duty.

The suit states:

Based upon the representations made by Defendants, the Defendants had a fiduciary duty to the Plantiff and Plaintiff Class Members to act in their best interest and to provide competent advice regarding the restructuring of the Plaintiff’s credit obligations.

The Defendants breached their fiduciary duty by failing to comply with the Georgia Debt Adjusting Act, by misrepresentating the willingness of creditors to resolve class members debt through debt settlement, by misrepresenting the ability of the Defendants to resolve class member debts, by failing to secure agreements with the creditors of the class members to resolve their debts and by performing no service of value for the fees the Defendants received. – Source


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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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