Joseph Pickett says he was struggling with about $21,000 in credit card debt last year when an unsolicited e-mail ad dangled the prospect of eliminating the financial burden. After replying to the message, Pickett, a 24-year-old night manager for a Northern California hotel, says he charged nearly $3,000 to Financial Solutions, a company that told him to stop paying the credit card bills and demand formal proof of the debt. The advice came from a firm that a federal indictment in Florida alleges was part of a scheme involving income tax conspiracy, tax evasion and wire fraud, a USA TODAY review shows.
Today, Pickett says the debt has grown to roughly $25,000, and the credit card firms have written off the total, further damaging his credit report. Financial Solutions had told him that outcome was unlikely, he says. “If the indictment is true, obviously, I’ve been victimized — they lied to me,” Pickett says. Amid signs of a steep recession, an Internet-based industry of self-described debt-counseling firms is offering consumers ways to eliminate or reduce credit card bills and repair credit records. But prosecutors, government officials and consumer advocates say some of the programs seem too good to be true — and are. “Usually, the first form of advice some of these companies offer is to stop paying your debt, which is, quite frankly, the absolutely worst thing you can do,” says Stephen Cox, spokesman for the Council of Better Business Bureaus, calling such a recommendation “one of the red flags.”
Although there are no definitive national statistics on debt-related scams, reports from federal and state agencies indicate the problem seems to be rising. The Council of Better Business Bureaus logged 892 complaints across North America about all types of credit and debt-counseling issues from January to June. That puts the category on track to top the 1,704 reported during 2007. American consumers filed 3,092 complaints about debt management or credit counseling in 2007, Federal Trade Commission records show. Read complete article
Unfortunately, sometimes the best form of negotiation is when fear is created from a consumer not paying their bill. Yes there are shady debt negotiating companies, but there are also good reputable debt settlement companies as well. I wonder if it would have been better for Joseph Pickett if he paid his credit cards late every month and let interest on top of interest compound. Well late payments and no payments affect their credit scores nearly the same….What about bankruptcy? Would that have been good for your credit? Consumer Counseling? No that reports late every month as well. This is a great written article, but I wonder if Joseph has informed the writer about his other options?
4 Comments until now
i see commercials all the time about debt settlement but is it just a scam? Has anyone ever used this type of program and if so, what were your results? Thanks!
Along with the genuinely helpful firms, there are plenty of operations billing themselves as legit debt settlement companies. These debt company scams prey on debtors by promising relieved debt and empty their pockets forcing payment of outrageous fees
Words from a Very Outspoken and Opinionated California Litigation Attorney
Here in California, our Department of Real Estate website (dub dub dub dot dre dot gov) lists the companies that have DRE “permission” to modify loans… add to this list any licensed California attorney, and that is where you should begin your due diligence search when you seek help in California. Other states probably have similar laws, so check with your own state DRE and state bar.
My law firm has been getting more and more calls recently from homeowners that were victims of predatory lenders who put them into an unaffordable loan and now fell into the hands of those same people who sold the toxic loans but profess to be saviors… DON’T BE A VICTIM TWICE! What’s that they say, “Fool me once, shame on you, but fool me twice, and I’ll sue your butt!”
Do your homework and THOROUGHLY investigate any firm before hiring them to save your biggest asset and the place you call “home.” Scammers are popping up like dandelions on a freshly mowed lawn in April. They advertise on the Internet, freeway billboards, radio, television, and print media everywhere, not to mention spamming your email box with those third-world widows needing someone to receive three million dollars for them. Make no mistake, in many cases, these “loan modification experts” are the exact same loan officers and mortgage brokers who fleeced homeowners the first time around. After losing their jobs with the crash of the mortgage industry, they have found a new way to make ill-gotten profits from hard-working homeowners through loan modifications.
In California, with very few exceptions (and attorneys are one exception… no coincidence there… attorneys make the laws), it is against the law for anyone to take money up front for helping a homeowner who is in default. Don’t trust a company that begins its relationship with you by breaking the law.
HERE’S THE BOTTOM LINE!
Hire an attorney – and not just any attorney either – one with experience in mortgage law, not just one with real estate law experience but one with experience in both FEDERAL and STATE litigation against mortgage companies, one who doesn’t also do family law, criminal law, admiralty law, and immigration law as well, one who limits the practice to mortgage law (or at least a great majority of it), one who has the experienced staff, training, and know how to take on the big lenders and their top notch lawyers (lenders have attorneys – and darn good ones – check out their counsel on the web – big names top schools, shouldn’t you have a lawyer too?).
We are not talking about a refund on your broken television here, we are talking about hundreds of thousands of dollars and your HOME – if you don’t think this is the time to hire a highly educated and experienced professional instead of a weekend schooled, almost out of work, broker slash loan officer slash “expensive water in a wine bottle with alleged magical curative powers” salesperson, I don’t know what would make you take things seriously.
Of course, this is one obnoxious lawyer’s totally biased opinion, but one based on many many distressing calls to my office every day. And, yes, my firm loves taking cases against loan modification companies who have violated laws. This field is quickly becoming one of the fastest growing sections for our mortgage law firm.
- Paul J. Molinaro, Esq.
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