New York Attorney General Andrew Cuomo has filed lawsuits against two of the nation's largest debt settlement companies, alleging consumer fraud, deceptive trade practices, and false advertising. The suits are the latest efforts in the New York AG's ongoing probe into how these companies may be preying on consumers who are struggling financially.
Cuomo's office filed separate suits against Credit Solutions of America, Inc. of Texas and Nationwide Asset Services, Inc. of Arizona. According to a Press Release from the New York AG, the companies "have engaged in fraudulent and deceptive business practices and false advertising," and "have made millions of dollars on the backs of New Yorkers by selling misleading debt settlement plans that very rarely deliver the promised benefits to consumers dealing with debt." See details of the lawsuits in a Press Release from the Office of the New York Attorney General.
Also today, Cuomo's office launched www.NYDebtHelp.com, which explains debt settlement scams, allows victims of debt settlement fraud to file complaints, and tracks the AG’s investigation.
Earlier this month, Cuomo's office announced that a number of debt settlement companies had been issued subpoenas and would need to pull back their curtains to show what they're really doing to help their customers.
Debt Settlement Companies: What To Watch Out For. Debt settlement companies often advertise that they can negotiate with banks and credit card companies to get consumers' debt balances drastically reduced, even to "pennies on the dollar". And it is true that some creditors may be willing to negotiate a reduction in the amount of debt owed, especially if a consumer is on the verge of filing for bankruptcy (think of it as a "something is better than nothing" approach).
But in reality, debt settlement companies can't guarantee that any creditor will agree to accept partial payment of debt that was accrued legitimately (i.e. credit card balances), and you should NEVER follow the advice of a debt settlement company that tells you to start making payments to them instead of to your creditors.
You should also be wary of debt settlement companies that try to charge you fees up-front and tack on percentages. More red flags when it comes to debt settlement companies are promises that your credit report will not suffer if you use their services (it almost certainly will), and guarantees that negative information can be removed from your credit report (it can't be removed, unless the information is inaccurate). Learn more: Debt Negotiation Programs: What to Watch Out For.