FTC Sues Three Companies Marketing Bogus Credit Card Rate Reduction Programs to Consumers
The FTC announced this week that it had filed lawsuits against three companies: Economic Relief Technologies LLC, Dynamic Financial Group (U.S.A.) Inc., and JPM Accelerated Services, http://www.ftc.gov/opa/2009/12/robocall.shtm. The lawsuits, which were filed in Florida, Georgia and Ilinois, allege that the companies have been marketing worthless credit card interest rate reduction programs to consumers via automated phone calls, also known as ‘robo” calls. According to the FTC, not only have the companies failed to deliver on their promises, but their calls have violated the federal Telemarketing the Do Not Call Rules.
Telemarketers working for the three companies told consumers who were interested in the program that the program would allow them to save thousands of dollars in interest within a short period of time and would make it possible for them to pay off their debts faster. Consumers were also told that to achieve these benefits they would have to pay as much as $1,495 up-front, but were promised that if they did not save a “guaranteed” amount — usually $2,500 — they could get their up-front payment back. Few consumers ever received a refund however.
Consumers should know that they have just as much likelihood (if not more) of successfully reducing their interest rates with their creditors on their own rather than by paying someone to attempt to do it for them. If you try it on your own and you hit a brick wall, do not get discouraged. Try again a week or so later and you may have success.
One little tip for those consumers whose high interest rate credit cards may force them to make a payment late:Missing a payment by as a little as a week or two will often give your account a different status that will qualify you for interest rate and minimum payment reductions that were curiously unavailable to you prior to your late payment. However, I must stress that this strategy for getting such reductions is only appropriate for someone who was already unlikely to be able to meet the minimum payment requirement.
Media’s Lack of Understanding About Debt Settlement’s Potential for Consumers
is Frustrating and Bad for Consumers
Sure, there are exceptions, but I’ve found that most media run the other way when it comes to covering debt settlement. They seem completely unwilling to get educated about do-it-yourself settlement options and about ethical debt settlement firms like CRN, that provide debt-stressed consumers with a valuable service and charge them fairly for that service, unlike most debt settlement firms. Instead, they either ignore debt settlement or they paint debt settlement firms with a broad brushstroke, characterizing every firm in the industry as a rip off.
Not only is this characterization unfair to those members of the settlement industry that truly want to help consumers get out of debt, but it’s also unfair to consumers who are burdened down with debt and looking for a way out. If they work with the right firm, debt settlement can be a great solution for many of those consumers. Yet, most media reports scare consumers about settlement and warn them to steer clear.
With countless consumers struggling to deal with mountains of debt and with the consumer bankruptcy rate on the rise, the media is doing consumers a disservice by not providing them with fair and balanced information about debt settlement. By fair and balanced I mean:
• explaining the goal of debt settlement
• detailing when settlement is an appropriate option and how it compares to other debt management options
• educating consumers about how to settle their own debts and the resources available to help them
• telling consumers how to chose a reputable debt settlement firm
• warning consumers about the warning signs that a firm is not on the up and up
So, I am issuing the media a challenge: Get informed about debt settlement! Understand how it can (and should) work and who it’s right for, warn consumers about the bad firms, and inform them about the good ones. Under the right circumstances, debt settlement can be a great option for consumers and every bit as legitimate an option as debt consolidation, working with a credit counseling agency or filing for bankruptcy. So, it’s time for the media to inform consumers who are drowning in debt that there is another option available to them — debt settlement.
Every day I receive a daily Google alert in my e-mail inbox that features links to articles, press releases and blogs about some aspect of debt settlement. It’s one of the ways that I stay abreast of what is happening in my industry and it’s the kind of information that any financially-troubled consumer might find by searching on the Internet for helpful resources using key words like debt settlement, debt problems, debt settlement firms, or debt negotiation. However, I’ve been dismayed to see that more often than most of what I read in these alerts is not factual and appears to have been written by debt settlement firms or their representatives with the goal of getting unsuspecting consumers who are confused and scared about their financial situation to work with them.
Here are common examples of the kinds of misleading blather I read in the alerts that show up in my e-mail box each morning:
• Press releases that supposedly are announcing news about a particular debt settlement firm or some aspect of settlement. In fact, the releases contain no news content of any sort and are being used by unethical firms to get consumers to click through to their web sites. At least one of the wire services transmitting these “press releases” appears to be little more than a vehicle for posting articles on the web and not a true wire service at all.
• Poorly written articles about settlement with titles that have been chosen to make it appear as though the articles actually provide valuable advice and information to consumers who need help managing their debts. In fact the information in these articles is marginally useful at best and sometimes totally misleading. You’ll find the real purpose of these articles in a closing paragraph where readers are encouraged to contact a debt relief network, which the articles claim is comprised of highly ethical settlement firms with proven track records for helping consumers. Don’t believe it!
• Half-written blog posts about some aspect of debt that are surrounded by lots of ads for debt settlement firms. I assume that the agenda of whoever writes these posts is less about completing the post and providing readers with truly useful advice and information and more about getting readers to click on one or more of the ads.
• For-profit debt settlement organizations that use names to make them sound like they are non-profits or that imply that they are affiliated with a federal government debt settlement program. The theory here is that consumers will be more apt to trust a non-profit or a firm that’s affiliated with the government. Fact: Debt settlement firms are businesses, not nonprofits, and there is no federal debt settlement program.
• Articles, blogs and press releases encouraging consumers to visit specific debt settlement forums before choosing a debt settlement firm. Supposedly, consumers who participate in these forums will have an opportunity to communicate directly with other consumers who are working happily with a debt settlement firm or who have already settled their debts with the help of a particular firm. Although there are legitimate forums where consumers can obtain truly useful information, some forums have been created by debt settlement firms or their representatives and if you participate in one of them, the consumers you communicate will be nothing more than people who are being paid by the firms to share information with you, to gain your trust and to recommend the firms to you. Other forums work a little differently. For example, in some of them, someone will try to get you to provide him with your name and e-mail address and then that individual will sell your information to a debt settlement firm. Not long after, the firm will contact you offering to help you resolve your debt problem.
Obviously you must be very, very careful when you search for debt settlement assistance online because there are a lot of firms out there who are willing to use underhanded and misleading tactics to gain your trust and who are all too ready to promise you the moon, take your money and give you little or nothing of real value in return. Therefore, before you share any information with anyone on a debt settlement forum, before you agree to work with any debt settlement firm or to pay the firm money, check it out with the Better Business Bureau, http://www.bbb.org/us/Find-Business-Reviews and with your state attorney general’s office, http://www.naag.org/attorneys_general.php. In other words, when it comes to debt settlement the old adage caveat emptor, or buyer beware, definitely applies.
Government Report Recommends Much Needed Changes to the
Federal Fair Debt Collection Practices Act
If you are old enough, think back to how you communicated with others back in 1977, the year that the federal Fair Debt Collection Practices Act was written, which is the primary law protecting consumers from abusive debt collectors. You called people using a landline, wrote letters or met face to face. There was no Facebook, no cell phones or voice mail, no caller ID, and no fax machines. In other words, from a communication technology perspective, 1977 was light years away from where we are today. Therefore, as the Government Accounting Office (GAO) points out in a new report to Congress on the debt collection industry, Fair Debt Collection Practices Act Could Better Reflect the Evolving Debt Collection Marketplace and Use of Technology, go to levin.senate.gov/…/2009/GAO.creditcarddebtcollection.102109.pdf, the FDCPA is woefully out of date because it has not been amended to address how debt collectors are using these new technologies to communicate with consumers about their past due debts, even though in many instances by using them debt collectors are violating the intent of the FDCPA.
The GAO’s recommendation to Congress that it better protect consumers by amending the FDCPA so that it reflects today’s modern means of communication could not come at a better time. Just consider, consumer credit card debt has skyrocketed over the past several years, the rate at which consumers are falling behind on this debt has been increasing, and complaints about debt collectors are on the rise, fueled in part by the fact that a growing number of consumers simply can’t afford to pay what they owe and so some debt collectors resort to illegal tactics to try to get at least some money out of them. According to the Federal Trade Commission (FTC), the agency charged with enforcing the FDCPA, it now receives more complaints about the debt collection industry than about any other industry, and it saw a 34% rise in those complaints between 2004 and 2008. Underscoring the problem the Better Business Bureau and the offices of many State Attorneys General have also seen significant increases in complaints against debt collectors.
The GAO report also examines changes in the debt collection marketplace and how they are affecting consumers’ FDCPA rights and recommends that the FDCPA be amended to reflect the realities of today’s debt collection industry. For example, the report points out that debt buying has become much more commonplace that it was when the law was written. Debt buying occurs when a debt collector either purchases past due debts from a creditor or purchases them from another debt collector; sometimes those debts are bought and sold repeatedly. The problem this has created is that the buyers of the debts don’t always have adequate information about the debts when they attempt to collect them and as a result, they are more apt to try to collect the wrong amount of a debt or to contact the wrong person for payment, among other problems. The report notes that this tends to be a bigger problem the farther away from the original creditor a debt has moved. In other words, the buyers of debts that have been bought and sold more than once already are more apt to have inadequate or erroneous information about those debts. The issue of inadequate information is important because there are many instances of consumers whose lives have been made miserable by debt collectors demanding that they pay debts that did not belong to them or that they pay more than what they actually owed on a debt and some of these consumers have even been sued over the debts.
Here’s another reason why the issue of inadequate information is important. If a debt collector contacts you, you have the right to ask the collector to provide you with written verification of the debt. However, many debt collectors who buy debts claim that they do not have the information they need, like a consumer’s account billing statements, to provide the legally required written verification. Also, complicating matters, there is confusion about exactly what constitutes written verification because the FDCPA as currently written does not provide specific guidelines on this matter.
The GAO report makes another important recommendation. It advises Congress to give the FTC rulemaking authoring over the FDCPA. Rulemaking authority will allow the Commission to more effectively respond to an evolving marketplace and changes in technology. Makes perfect sense to me especially given that the FTC has this authority in regards to all of the other consumer protection laws it enforces and without rulemaking authority, the Commission is hampered in its ability to regulate the practices of debt collectors and protect consumers.
One last comment. The GAO report focuses largely on the debt collection practices of the very biggest credit card companies—all of which are federally supervised banks. However, it expresses concern about the debt collection practices of smaller, high-fee, sub-prime credit card issuers, which are often local banks. The problem according to the report is that these other card issues have been especially aggressive in their efforts to collect past due debt. I hope that the GAO takes a hard look next at this sector of the credit card industry.
“If I could tell people one thing, I would say, if you think debt settlement is a good option, look at CRN. Compare the individual plan that CRN will create for you to anyone else and then go with what makes sense. In six months I never found anyone that would even come close to providing me with what CRN did.”
“I can't thank my credit coach more!! After putting 2 children through college and having some financial setbacks, I found my home equity on the line and I was drowning in debt. A friend told me about the credit coaches at Consumer Recovery Network and within weeks I was able to settle my debts with their coaching and assistance.”
