Unfortunately this is going to be an all too common headline in the coming months. With Debt Settlement companies ripping off consumers at an alarming rate, the FTC and state regulatory bodies are taking notice and stepping up enforcement. Debt Relief USA recently filed for bankruptcy citing several investigations by state attorney generals and federal authorities as the reason for closing their doors and filing bankruptcy.
Why were they being investigated? Because they were doing what most debt settlement companies are doing. Ripping off consumers! Charging large fees upfront, stretching out client programs for 4 years, misleading consumers, getting them sued and not providing the promised services among other things.
So this is great news for future consumers that will not be able to fall victim to Debt Relief USA. What about their current clients? Well unfortunately they got screwed. In a letter from the Texas Attorney General sent to each current and former client of Debt Relief USA he states:
“IF YOU ARE A CURRENT DEBT RELIEF USA CUSTOMER (the company was holding your “set-aside” funds in order to settle your debts): The Texas Attorney General is working with the Chapter 7 Trustee to ask the Bankruptcy Court to refund your “set-aside” funds to you as fully as possible. Because of the limited funds in the estate, it is unlikely that you will receive a refund of any fees that were paid to the company“.
You can read the actual letter here
If you just paid a debt settlement company 5 or 10 thousand dollars in fees, how would it feel to get a letter like that in the mail?
If you are a victim of this company what can you do about getting your money back? Nothing. You can’t do a single thing but wait and hope that when the bankruptcy attorneys are finished taking all of the money out of the company, there will be a little left to refund consumers. I hate to be pessimistic here, but speaking from personal experience, there is almost never any money left for consumers. The case will stay tied up in bankruptcy court until there is no money left to fight over.
Bryan Fears, a Texas Bankruptcy Attorney says:
Debt settlement is big business, but many debt settlement companies have caused big trouble for their clients. Bankruptcy attorneys regularly see the damage caused by debt settlement companies. In some cases money is not returned to debt settlement customers, or the company itself files bankruptcy, or the individual’s credit is destroyed.
If you are thinking of hiring a debt settlement company to help you with your debts, how can you protect yourself against a company collecting all of their fees from you and then going out of business? Simple.
DON’T ENROLL INTO A DEBT SETTLEMENT PROGRAM THAT CHARGES ALL OF THEIR FEES BEFORE SETTLING ALL OF YOUR DEBT!
I can’t possibly make that any clearer. I don’t care what the “super helpful” sales person does to wow you about being a member of TASC or USOBA, or how large they are, or what great settlements they get or whatever magic trick they use to get you to not look at the fact that they charge all of their fees before performing your service.
Any company that demands to get paid all of their fees before you can approve of their work, is the largest Red Flag in the history of Red Flags. Don’t do it. If they don’t tie their fees to their actual performance, that tells me they don’t have much confidence in their ability to provide you with a successful outcome. That is why they want to collect all of their fees as quickly is possible. Well if they don’t have confidence in their own ability, should you?
What do you think about how most of these debt settlement programs charge clients their fees upfront without any guarantee of a positive outcome? Please share your thoughts HERE
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Wow!, you know things are bad when a company designed to help others with debt is so much in debt that it files for bankruptcy. It begs the question, was this company qualified to help others?
.-= ppo´s last blog ..PPO Insurance and Plans and deductibles =-.
That is true, but they actually cited legal action by regulatory agencies as one of the main causes of the Bankruptcy. Basically they were ripping off so many consumers that they were coming under heavy scrutiny and having to pay stiff fines. So they figured it made more sense to close their doors rather than to try and get away with ripping off more people. So everyone that was a client of theirs, unfortunately were left much worse off financially then they were before they hired them. The lesson is to never enroll into a debt settlement program that charges all of their fees before settling all of your debt.
.-= Damon Day´s last blog ..Debt Settlement USA – A Not So Glowing Review =-.
That is a sad story. I hate to hear anyone getting ripped off like that. I hope the consumers learned a lesson from, as it was an expensive one. You should NEVER pay that much upfront for a service before it has been performed. I think there are quite a few questionable companies out there that provide “debt relief”. But I guess there’s always a few bad apples in every industry.
BELLA FINANCIAL IN DALLAS TEXAS, FILED BANKRUPTCY MAY 2010; THEY ARE STILL IN THE SAME LOCATION, SAME OWNERS, SAME EMPLOYEES- UNDER MT VIEW FINANCIAL GROUP OUT OF VERMONT. THEY FILED A CHAPTER 7 AND I HAVE BEEN TRYING TO GET IN TOUCH WITH THEM FOR 3 WEEKS NOW. NOBODY ANSWERS THEIR 866-681-6384 NUMBER; I WENT IN PERSON TO THE OFFICE AND THEY ALL FLED TO THE BACK ROOM AND SAID THE PERSON I NEED TO SPEAK TO ISN’T IN. i HAVE SENT NUMEROUS E-MAILS AND LEFT DOZENS OF PHONE MESSAGES. I JUST WANT SOMEONE TO TELL ME THE TRUTH. GETTING MY $4000 BACK WOULD BE ICING ON THE CAKE. I CAN’T BELIEVE THESE CRIMINALS GET TO OPERATE LIKE THIS. THIS IS NOT THE FIRST TIME THEY HAVE DONE THIS. THERE IS AN ATTORNEY GENERAL COMPLAINT AND OVER 60 BBB COMPLAINTS! LESSON LEARNED. BTW, I SETTLED MY 3 CARDS WITH THE BANKS MYSELF.
Gosh, how I wish I saw this site before I became a victim myself.
I have little sympathy for many debt companies given that rather than actively addressing debt issues for clients, they just add another layer of debt, through excessive and pointless charges. However that doesn’t mean that all such organisations are like this. Non profit debt advice organisations are normally the best option, but they can be difficult to find
I certainly agree with your assessment of how most debt relief companies operate, I would have to caution a consumer not to let their guard down simply because a company is organized as a non profit.
Remember, “non profit” has nothing to do with fees, and a non profit organization can be just as much if not more harmful to a consumer than a for profit entity.
Just remember, they all make money.
Wow, that would be the worst. Not only having to pay the debt anyway, but also losing some or all of what you paid the settlement company.
I see you’ve got an ad for debt settlement in the top right-hand side of this site. Can I assume that the companies you link to from there are “safe”?
For the most part yes. You will not find an ad on my site for a program that I don’t approve of. In regards to debt settlement, I know the owners of the programs personally and none of them charge any fees until after they have settled your debt. So while I certainly can’t guarantee what will happen in the future, it would be impossible for a situation to happen where you pay a lot of money in fees and then have the company go out of business without providing the service that you paid for. Since they don’t get paid until you get your settlement.