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Shady credit counseling services may do more harm than good
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Credit counseling has become a big business thanks to consumer debt. Being a big and growing business has attracted many shady firms who are in for the money without actually providing a good credit counseling service. A shady company might request for a phone number or a website address that is similar to a good credit counseling agency to fool clients into thinking they are a genuine credit counseling agency. Below follows is a discussion with Mike Hoggan who explains how a shady credit counseling company tried to highjack their clients with phoney phone numbers. You too need to be careful in choosing the right credit counseling firms and avoid the shady ones that may do more harm than good.
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Shady credit counseling services may do more harm than good
Mike Hoggan, who manages the Billings branch of the Consumer Credit Counseling Service of Montana, was tipped off when a Dex telephone book salesperson asked why his company had changed its telephone number.
The Billings office, which has counseled local debtors for nearly four decades, hadn't switched numbers. So Hoggan started nosing around.
It turns out a Florida company had taken an almost identical name - and a Billings phone number - in the just-released Dex phone book. The "local" number rings through to South Daytona Beach, Fla.
"Right above our listing, it has the bogus company, Consumer Credit Counseling, with their supposed local phone number," Hoggan said.
CCCS of Montana operates eight offices around the state.
Among all the Yellow Page ads for credit counseling, only CCCS of Montana and Debt Reduction Services actually staff Billings offices, said CCCS Chief Executive Officer Tom Jacobson of Great Falls.
"We've gone from these small community-based credit-counseling organizations that are really helping people, to ads taken out by out-of-state companies that are trying to mislead," he said.
Who are those guys?
When people are caught in a credit-card choke and start staring at bankruptcy, they tend not to think clearly and can be easy prey for fraudulent companies.
A decade ago, Jacobson said almost all the 200 credit counseling agencies were legitimate and community based.
That has flip-flopped.
Out of 1,000 companies today, Jacobson said, only about 125 are reputable.
When he called the Florida company, Jacobson said the salesperson acted like he was in Billings. When he tried to set up an office interview, the salesperson said all the counselors were busy, then tried to get his financial information over the phone.
A real beach
The Florida company goes by at least two names.
According to records filed with the Florida Secretary of State office, the company calls itself Consumer Credit Counseling of America Inc. and Consumer Credit Counseling Bureau.
It lists several Florida addresses in Daytona Beach, Fort Lauderdale and Ormond Beach, and in Chelmsford, Mass.
Eric Nabydoski is listed as president.
Judy Pepper, president of the Better Business Bureau of Central Florida in Orlando, said, "Oh yes, I know Eric and he knows me."
Since the BBB opened a file on the company in April 2003, 32 consumers, mostly from California, have filed formal complaints.
"Right now I have five complaints that are unanswered," Pepper said.
The BBB report says consumers complained about unauthorized withdrawals, failure to disclose that their initial payment is taken as a setup fee and failure to state the company's true nature.
CCC isn't a debt counseling company after all, Pepper said.
"He's a telemarketer. He would get the information and take an upfront fee," she said. The Florida company then hands debtors off to other companies, including one in Evanston, Wyo.
Trouble in paradise
Calls to Nabydoski were not returned.
However, a man identifying himself as Edward Kennedy of the Hess Kennedy law firm in George Town, Grand Cayman, called saying he represented the company.
The Consumer Credit Counseling name is not trademark-protected, he said, adding that he didn't think his client had intentionally advertised in Billings.
The privately held company is in compliance with Florida laws, he said.
When asked for his telephone number, Kennedy said, "Have a great day," then hung up.
Pepper at the BBB wondered if the man's name was real or taken from the senior senator from Massachusetts. The company's address in the commonwealth state, she said, is just a mail drop, and telemarketers often work under false names.
Helena gets involved
Cort Jensen, the lead attorney at the Montana Office of Consumer Protection in Helena, has his eye on the Florida company.
Apparently to get a local phone number, it listed a street address in Billings that turned out to be AT&T's address - a building so secure that even the postman can't enter.
Under Montana law, companies cannot use unfair or deceptive practices. Only nonprofits or companies bonded in this state can counsel debtors. The Florida company isn't bonded here, and it has registered as a for-profit in its home state.
One consumer has complained about this company to Jensen's office and so has the CCCS of Montana.
"I really don't want Montanans to get hurt and they could," Jensen said.
Montana law leaves nonprofits mostly unregulated. However, House Bill 140, which would set up some controls, gets a hearing before the Montana Legislature on Tuesday.
Jensen has placed two telephone calls to Florida.
"They haven't returned my calls. I can't imagine why. Wait. Irony doesn't translate well in newspapers, so I'll restate," he said. "If the company is legitimate and if it is complying with Montana law, I'd love to have them contact me."
Tracing the listing
Qwest Communications, the regional "Baby Bell" serving Montana and Wyoming, sold its telephone directory business.
Pat Nichols, who represents Dex in Denver, said the CCC in Florida isn't a customer because it didn't buy a phone book ad. Its only listing is in the white pages. Those are local numbers that come directly from Qwest.
"We are obligated to print the Qwest and other listings exactly as we receive them," she said.
Dex cannot police all the millions of telephone listings it receives, she added.
"However, we are very concerned, especially when it affects consumers and a legitimate company in Billings," Nichols said.
The CCCS of Montana has hired a Billings attorney to obtain a preliminary injunction. A court order, Jacobson said, could make Qwest either disconnect the bogus number or route the Florida calls to its office on Alderson Avenue.
Windin' up in Wyoming
After the Florida telemarketers land the clients, they are farmed out to other credit counseling firms, including one in Wyoming.
An Evanston, Wyo., company using the name Family Financial Education Foundation is taking referrals, according to the Central Florida BBB.
Family Financial also bought an ad in the Billings Yellow Pages. The Web site (www.ffef.org) says it processes up to 1,200 new clients each month.
The company has been in business since 1990 and has a 501(c)(3) non-profit status.
Jensen said credit counseling companies must have a non-profit status to work in most states. The IRS is re-evaluating this designation that allows so many companies in this industry to avoid paying taxes.
"Non-profit status has nothing to do with the charitable purpose or legitimacy of a business," Jensen said.
Family Financial has a satisfactory rating with the Better Business Bureau.
The company's President and Chief Executive William Richards Cluny did not return telephone calls.
"If this Florida listing truly is supposed to be a number for the Wyoming company, why not use its own name?" Jensen said.
What's a consumer to do?
Jacobson said consumers need to work with a company close to home that they can actually visit.
If that isn't feasible, he said they must check out the companies carefully and have an attorney read the contract before they sign.
All this, he said, is a sad diversion.
"We're having to spend resources, time and money defending our integrity against this nonsense instead of helping our consumers," he said.
"I can't tell you how frustrating it is."
Jan Falstad can be contacted at (406) 657-1306 or at jfalstad@billingsgazette.com.
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Christian Credit Counseling Service
A Christian credit counseling service useful for anyone with problem debt. A good counseling agency can provide advice regarding money management and debt consolidation. They can also help arrange a repayment plan with your creditors to help you get out of debt. A bad agency can charge excessive fees, pocket money that was intended to pay your bills, and steer you into greater debt than before. Predatory credit counseling has become a multibillion dollar industry, and with the recent passage of the Bankruptcy Abuse and Consumer Protection Act, credit counseling will soon become mandatory for anyone filing for bankruptcy. How can you avoid becoming a victim of credit counseling scams? How can you choose a helpful and reputable credit counselor?
Here are a few tips that can help you avoid becoming a victim of predatory agencies:
# Many agencies claim to be nonprofit, but that doesn't mean they don't charge money or work with for-profit companies. Inquire about the fees the company charges. Is there a setup fee? Monthly payments? Does the company keep the first payment, or does some of it go towards your debts? Fees should fall within your ability to pay, and any agency that is trying to help you will know this. A company that charges hundreds or thousands of dollars in setup fees is probably not interested in anything other than your money.
# Ask the counselor how he or she is compensated. A salary or hourly wage is a good answer, but you should be suspicious if they are on commission or earn incentives by steering you towards expensive debt consolidation programs. A good Christian counseling service should direct you towards solutions that help you, not solutions that earn them more money.
# Will your creditors work with this agency? Call your creditors directly and ask them if they will negotiate with the specific agency you're seeing. Counselors often state that they can get your creditors to lower fees, restructure debt or lower interest rates. Can they? Call the creditors yourself to be sure.
# Make sure that you get all of the counselors promises and terms in writing. Anything that he or she tells you verbally isn't binding, so don't believe it if it isn't written down.
# Make sure your counseling service provides you with monthly reports that state how much you have paid them and who is receiving the payments. Don't take them at their word that your bills are being paid; verify it.
# Check with your local Chamber of Commerce or Better Business Bureau to make sure that there are no outstanding complaints against this agency. The counseling business is full of fraud, and complaints are common. It's smart to inquire.
By taking your time, asking the right questions, and doing proper research, you should be able to find a helpful and reputable Christian credit counselor who can help you reduce or eliminate your debts. Thousands of Americans are victimized each year by predatory counseling firms, but there's no reason why you should become a victim of one. If you have problem debt, you have trouble enough already without looking for more.
About the Author: ©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com, a site devoted to debt consolidation and credit counseling. Source: www.isnare.com
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