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Consumer
Alert: Some ‘Get Out of
Debt’ Firms Sink Customers Deeper
The California Department of Consumer Affairs (DCA) is again warning
consumers with debt worries to use caution when considering “Get
Out of Debt” companies. Some “Get Out of Debt” companies
face state and federal consumer fraud charges.
Consumers should closely examine any promotion promising to eliminate
calls from debt collectors, lower interest rates or reduce debts.
Promises to instantly erase debt and repair credit are likely too
good to be true. DCA offers the following tips for selecting a credit
counseling or debt-management program:
• Make sure the company has a good track record. Talk with other
customers, get genuine references, and check with the Better Business
Bureau.
• Have the company send you written materials covering its business
history and services, before making any payments or signing any contract.
• Credit Services Organizations must be registered with the
California Attorney General and have a $100,000 bond on file with
the California Secretary of State.
• Look for a program that provides true budget counseling and
courses on how to budget, save and invest your money. Make sure the
counseling includes an action plan for paying your debts.
• A low-cost or no-cost program is less risky than one that
demands costly fees, up-front, before providing services.
• Ask if the program's employees are bonded, so the money you
pay for your creditors won't be lost.
• Ask how often payments are made to creditors. The agency should
pay creditors at least monthly.
• Insist on proof of payment. The company should provide monthly
statements showing when and how much it paid each creditor.
• Be wary of Web site promotions with no presence in your community
and little or no educational content.
• Heavy advertising doesn't necessarily mean good service. It's
often just the opposite.
• Just because a company is "non-profit" doesn't guarantee
good results. Your money may just go to pay high salaries.
Reputable companies put your money in a trust account, separate from
operating income, so it actually goes to your creditors.
Consumers themselves can take every action that a debt-relief company
can, often at no cost or low cost. If consumers need assistance, they
have the option of low-cost, non-profit credit counseling services.
After receiving a number of complaints from consumers, the Department
of Consumer Affairs first issued a “Consumer Alert” on
one “Get Out of Debt” company, Briggs & Baker, in
September 2002. Some consumers reported they’d paid the company
thousands, received no services and ended up deeper in debt. Briggs
& Baker now faces state and federal charges.
The FTC alleges Innovative Systems Technology, Inc. (doing business
as Briggs & Baker) and Debt Resolution Specialists, Inc., and
Todd A. Baker and Jack Briggs, also known as John Briggs, used false
and misleading advertising and failed to deliver on promised services.
Jack Briggs has agreed to settle the FTC charges. He signed a stipulated
order that permanently bars him from participating in any debt reduction,
negotiation, or consolidation business and from misrepresenting any
fact material to a consumer’s decision to purchase a good or
service.
The California Attorney General lawsuit against Briggs & Baker,
Innovative Systems Technology, Inc., Debt Resolution Specialists,
Inc., Todd Baker, Jack Briggs and other named and unnamed officers,
staff members or agents of the companies, alleges violations of state
laws against false and misleading advertising and unlawful, unfair
or deceptive business practices. It also alleges the defendants represented
themselves as a Credit Services Organization when they were not registered
with the Attorney General as required.
Two other companies are connected to the defendants, according to
the Attorney General’s Office. Defendant Innovative Systems
Technology, Inc. has also registered the fictitious business name
of “Professional Debt Solutions.” Another company that
offers similar services, “Financial Help Network,” is
a fictitious business name registered to a corporation owned by a
relative of defendant Todd Baker, and its Web site directs you to
Debt Resolution Specialists, Inc., also a defendant in the Attorney
General's case.
Visit the Department of Consumer Affairs Web site at www.dca.ca.gov,
the Federal Trade Commission Web site at www.ftc.gov and the Better
Business Bureau Web site at www.bbb.org for consumer information and
tips on credit counseling services and other credit-related consumer
issues.
The FTC offers the Credit Repair: Self-Help May Be Best guide. Consumers
can also review DCA's legal guides on “Credit Repair Services”
and "What To Do if You Receive a Demand for Payment from a Creditor
or Debt Collection agency" at www.dca.ca.gov/legal.
Consumers who believe they have been victimized by a debt-reduction
company can file a complaint with the Attorney General's Public Inquiry
Unit at: www.ag.ca.gov/consumers/mailform.htm.
Source: California Consumer Affairs Department
© CONTACTO Magazine
Published on June 8, 2004
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