01.07.12
Posted in Montana Consumer Law, Personal Injury at 1:56 pm by admin
We’re pleased to announce that effective January 1, 2012, Heenan Law Firm is now Heenan & Bishop Law Firm. John has been joined by his longtime mentors Randy Bishop and Gene Jarussi. Randy and Gene are both well-known and respected trial lawyers in Montana. Both Randy and Gene are past presidents of the Montana Trial Lawyers Association, and have been nominated by their peers as SuperLawyers. John is honored to have such successful lawyers working with him and looks forward to their help in continuing to grow the firm in order to provide the best legal advocacy to their clients. The office and phone number remain the same.
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09.01.11
Posted in Montana Consumer Law, Uncategorized at 10:21 am by admin
HLF Investigates Potential Consumer Claim that Nivea Skin Cream Can Help People “Slim Down”. If you used Nivea My Silhouette! skin cream in response to television or internet claims it would help you “slim down,” you may be able to pursue monetary compensation. Contact HLF to learn your rights and determine whether you qualify to participate.
The Federal Trade Commission recently reached a settlement requiring the maker of Nivea My Silhouette! skin cream to stop advertising that the cream can significantly reduce a consumer’s body size. The company also has agreed to pay $900,000 as part of the settlement. According to the complaint, Nivea marketed the skin cream in nationwide television ads and through sponsored search results on Google. One television ad depicts a woman getting dressed after having applied Nivea My Silhouette! cream to her stomach and thighs. She digs through the back of her closet, tries on a pair of old jeans, and discovers that they now fit.
The company also allegedly purchased sponsored search results from Google so that when consumers searched on the words “stomach fat,” “nivea slim silhouette,” or “thin waist,” they found Nivea ads implying that Nivea My Silhouette! could tone their stomachs, thin their waists, and help them slim down.
If you used Nivea My Silhouette! skin cream in response to television or internet claims it would help you “slim down,” you may be able to pursue monetary compensation. Contact HLF to learn your rights and determine whether you qualify to participate: info@heenanlawfirm.com
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07.21.11
Posted in Debt Collector Abuse, Montana Consumer Law at 1:50 pm by admin
Your credit score determines the interest rate you pay for a credit card, car loan, private student loan or a home mortgage. A low score could prevent you from getting a loan at all. But for years, this important number has been a mystery to most consumers.
Starting Thursday, that changes.
Consumer Law Change
A provision of the Dodd-Frank financial reform law that takes effect today requires lenders to provide consumers with a free credit score whenever:
•They reject an application for a loan. In that case, lenders will be required to provide consumers with an “adverse action” notice that includes their credit score and explains why they were turned down.
•They approve a loan but at a higher rate than the rate provided to their best customers. As in the first instance, lenders will be required to provide borrowers with a credit score and explain why they’re charging a higher rate.
Lenders must provide the score they used to make a decision about your loan. They’ll also be required to explain the factors that adversely affected your score and the range of possible scores so you’ll know where you stand. Consumers submit about 1 billion credit applications every year and of those, about half will fall under one of those two categories.
Many borrowers who receive the notices will be surprised to learn that they didn’t qualify for a lender’s best rate. That could encourage more consumers to shop around and take steps to improve their scores. The requirement won’t create a burden for lenders because they’ve already bought the scores from FICO or other credit score providers. The requirement won’t help consumers who want to view their scores before they apply for a loan. A federal law enacted in 2003 requires the three main credit bureaus to provide consumers with a free annual copy of their credit reports, but they’re not required to include a score.
If your credit score is negatively impacted by false/erroneous information, go to www.montanaconsumer.com to learn how to dispute the false information and get it taken off your report, as well as your rights under the Fair Credit Reporting Act.
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06.23.11
Posted in Debt Collector Abuse, Elder Abuse Law, Montana Consumer Law at 5:09 pm by admin
Being served with a collection lawsuit can be tremendously stressful and even embarrassing. By the time you are sued, you have probably been dealing with debt collection letters and phone calls for months or even years. Dealing with a collection lawsuit, by this point, can be the last thing in the world you want to deal with. No matter how much you wish you ignore, don’t! Here are the five biggest reasons you should never, ever throw that collection lawsuit away:
1. The Clock is Ticking. Under the rules of civil procedure, you generally have 20 days to respond to a lawsuit. Once you are served, the clock is ticking. If you don’t formally respond to the lawsuit, the debt collector will get a default judgment against you. This means you will forfeit and the collector will automatically win the case. Most debt collectors are ready to file the papers to get the judgment against you on the 21st day.
2. A Judgment Gives the Debt Collector Powerful Remedies. Once a judgment is entered, the creditor/debt collector obtains powerful tools to collect. This can include: a lien against your house or other property, the right to “sweep” all of the money out of your bank account, and the right to garnish your paycheck. Debt collectors today use powerful tools to track people’s assets and sources of income. You may think that the debt collector will never find you. Think again! The collector probably sued you because they know who you bank with, where you work, or what property you own. You must make an appearance in the collection case to prevent a debt collector from obtaining the legal right to you’re money from your paycheck or bank account.
3. Once a Judgment is Entered, You Lose Your Ability to Negotiate. Over 95% of collection lawsuits result in default judgments- the debt collector wins simply because the consumer doesn’t respond. If you do respond, then the debt collector needs to actually prove you owe the debt. This means the debt collector’s lawyer needs to work. By defending yourself and raising appropriate defenses to the collection lawsuit, you increase your settlement position with the debt collector.
4. Once a Judgment is Entered, You Lose Your Right to Contest the Debt. Debt collectors sometimes sue the wrong person. They might not really own the debt, and therefore be the wrong party to bring the collection lawsuit. Or, by the time they file the lawsuit, it may be beyond the statute of limitations. These are all defenses that can be raised if a consumer responds to the collection lawsuit in a timely manner. We talk to people all of the time who would have won their collection case had they simply responded before the deadline. Talk to a collection defense lawyer before the deadline expires.
5. Once a Judgment is Entered, You Lose Your Ability to Bring Certain Claims Against the Debt Collector. If you are wrongly sued, or sued on a time-barred (past the statute of limitations debt), you may have strong claims against the debt collector under the Fair Debt Collection Practices Act. For example, we represented a consumer who was sued by a debt collector on a debt that was past the statute of limitations. Not only did we get the collection case dismissed, but we brought a claim on his behalf against the debt collector. A jury awarded him $250,000. Had he not answered the bogus collection lawsuit, he never would have been able to bring his collection harassment case in the first place!
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06.09.11
Posted in Montana Consumer Law at 2:51 pm by admin
U.S. District Judge Donald Molloy of Missoula sentenced a Bozeman financial adviser Tuesday to 27 months in federal prison for taking $265,820 from her clients’ accounts, using some of the money to pay off her jewelry bill.
Molloy sent Anne Marie Schlenker to prison for 15 months, plus a year of unmonitored home confinement, plus three years of supervised release. She returned nearly $64,000 to her victims, but Molloy ordered her to pay $265,820 more in restitution.
Schlenker worked for Edward Jones and Co. from 2004 until her fraud was discovered in February 2010 and she was fired.
Schlenker wired $11,485 from a 72-year-old retiree’s account into her personal account to pay off her jewelry debt, according to the U.S. Attorney’s Office. She used another $50,000 of a client’s money to pay for upgrades to a Bozeman-area home she was building.
She pleaded guilty to wire fraud Jan. 27 for stealing money 16 times from five clients. She also agreed to allow the court to disclose her crime to employers or prospective employers.
Financial fraud and misconduct can cause serious injury to people and their finances. If you or a loved one is the victim of financial fraud, contact the Heenan Law Firm to learn your rights.
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05.11.11
Posted in Montana Consumer Law at 4:21 pm by admin
Oreck Halo Advertisement
If you purchased an Oreck Halo vacuum or a ProShield Air Purifier in response to Oreck’s health claims, contact the Heenan Law Firm to learn your rights at info@heenanlawfirm.com / 406.839.9091
Yesterday, the owner of an Oreck Halo vacuum filed a class action against Oreck Corporation in Illinois federal court. (Ruscitti v. Oreck Corporation 1:11-cv-03121 ). The primary charge is that Oreck misrepresented the “germ killing” abilities of its Oreck Halo vacuum. The lawsuit alleges that Oreck aggressively advertised and marketed the Halo vacuum’s ability to “kill and reduce virtually all bacteria, viruses, germs, mold, and allergens that exist on carpets and floor surfaces” including the flu and common cold. According to the lawsuit, such claims were not substantiated. The lawsuit alleges Oreck charged consumers a substantial premium for the “germ killing” Halo vacuum, and seeks remedies under state consumer protection laws related to false advertising.
Earlier this year, the Federal Trade Commission charged Oreck with making false and deceptive health claims regarding its Halo vacuum and ProShield Plus air cleaner products. (FTC File No. 102 3033). The FTC action was resolved last month with Oreck agreeing to pay a $750,000 penalty and being forbidden from making further unsubstantiated health claims in the advertising of its products.
According to the FTC complaint, which resulted from a referral by the Better Business Bureau’s National Advertising Division, Oreck advertised these products via infomercials, traditional television commercials, print ads, in-store displays, and online ads.
During the 2009 holiday season, online ads displayed the Halo and the ProShield Plus side by side under the headline “Introducing the Oreck Flu Fighters, Help Reduce the Flu on Virtually any Surface and in the Air in Your Home.” The ads also claimed the Proshield Plus “captures and destroys many airborne viruses like the flu.” An infomercial for the Oreck Halo claimed, “The Oreck Halo has killed up to 99.9 percent of bacteria exposed to its light in one second or less,” and also boasted that the vacuum’s light chamber “has been tested and shown to kill up to 99.9 percent of certain common germs, plus dangerous pathogens like E. coli and MRSA.”
If you purchased an Oreck Halo vacuum or a ProShield Air Purifier in response to Oreck’s health claims, contact the Heenan Law Firm to learn your rights at info@heenanlawfirm.com / 406.839.9091
The Heenan Law Firm is licensed to practice law in the State of Montana, and may work with firms in other states consistent with attorney rules and guidelines.
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04.27.11
Posted in Montana Consumer Law at 4:38 pm by admin
Sony PlayStation suffers massive data breach
The Heenan Law Firm has served as co-lead counsel in nationally certified data breach class actions. Many states, including Montana, have laws regarding the protection of consumers’ personal financial information.
NEW YORK/BOSTON (Reuters) – Sony suffered a massive breach in its video game online network that led to the theft of names, addresses and possibly credit card data belonging to 77 million user accounts in what is one of the largest-ever Internet security break-ins.
Sony learned that user information had been stolen from its PlayStation Network seven days ago, prompting it to shut down the network immediately. But Sony did not tell the public until Tuesday.
The “illegal and unauthorized person” obtained people’s names, addresses, email address, birth dates, usernames, passwords, logins, security questions and more, Sony said on its U.S. PlayStation blog on Tuesday.
Alan Paller, research director of the SANS Institute, said the breach may be the largest theft of identity data information on record.
Children with accounts established by their parents also might have had their data exposed, Sony said.
Sony said it saw no evidence credit card numbers were stolen, but warned users it could not rule out the possibility.
“Out of an abundance of caution, we are advising you that your credit card number (excluding security code) and expiration date may have been obtained,” Sony said.
Analysts said that, while Sony has notified its customers of the breach, it still has not provided information on how user data might have been compromised.
“This is a huge data breach,” said Wedbush Securities analyst Michael Pachter, who estimated Sony generates $500 million in annual revenue from the service. “The bigger issue with Sony is how will the hacker use the info that has been illegally obtained?”
Sony said it has hired an “outside recognized security firm” to investigate.
The company said user account information for the PlayStation Network and its Qriocity service users was compromised between April 17 and April 19.
Paller said Sony probably did not pay enough attention to security when it was developing the software that runs its network. In the rush to get out innovative new products, security can sometimes take a back seat.
“They have to innovate rapidly. That’s the business model,” Paller said. “New software has errors in it. So they expose code with errors in it to large numbers of people, which is a catastrophe in the making.”
He suspected the hackers entered the network by taking over the PC of a system administrator, who had rights to access sensitive information about Sony’s customers. They likely did that by sending the administrator an email message that contained a piece of malicious software that got downloaded onto his or her PC.
Hackers have stolen personal data in the past from large companies. In 2009, Albert Gonzalez pleaded guilty to stealing tens of millions of payment card numbers by breaking into corporate computer systems at companies such as 7-Eleven Inc and Target Co.
Sony said its users could place fraud alerts on their credit card accounts through three U.S. credit card bureaus, which it recommended in its statement.
Sony, a unit of Sony Corp, said it could restore some of the network’s services within a week.
The company declined to comment on whether it was working with law enforcement or other parties in its investigation.
The online network was launched in the autumn of 2006 and offers games, music and movies to people with PlayStation consoles. It had 77 million registered users as of March 20, a Sony spokesman said.
(Reporting by Liana B. Baker; additional reporting by Jim Finkle in Boston; editing by Robert MacMillan, Kenneth Li, Bernard Orr and Andre Grenon)
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10.18.10
Posted in Debt Collector Abuse, Montana Consumer Law at 10:29 pm by admin
The Wall Street Journal, in an article entitled “Mortgage System’s Woes Not Isolated“, featured a recently filed case by the Heenan Law Firm on behalf of a Billings homeowner. The foreclosure was dropped after the Heenan Law Firm filed suit.
By RUTH SIMON
“Robo-signers” who approve documents without reading them aren’t the only example of sloppiness in mortgages.
As the foreclosure process comes under nationwide scrutiny, judges are questioning how servicers calculate amounts owed on loans. Some borrowers claim they lost their houses because of bungled payment processing and accounting. And there are growing worries about whether important mortgage documents were recorded properly, especially on loans packaged into securities.
At the heart of many of the current problem is that mortgage servicers’ business model isn’t suited for the high delinquency rates of the housing crisis and the pressure to rework troubled loans. It is hard for mortgage servicers to make money by doing anything but pushing paperwork through the pipeline.
Journal Community
Even before the mortgage meltdown, the servicing industry “was plagued with problems,” such as servicers charging unauthorized or excessive fees and making false or unsubstantiated statements about how much borrowers owed, says David Vladeck, head of the bureau of consumer protection at the Federal Trade Commission, which has brought several recent cases against servicers. Mr. Vladeck said the FTC is now trying to “drill down” to make sure the servicers it regulates have the proper procedures in place to make sure underlying documentation is sufficient and accurate.
Servicers typically get paid a fee of 0.25% to 0.5% of a loan’s balance, plus late charges and other fees when a mortgage tumbles into default. The mortgage-servicing industry is made up of scores of companies, from big banks to independent operators such as American Home Mortgage Servicing Inc.
But the cost of servicing a mortgage has more than doubled in the past five years, pressuring profit margins, says Edward Delgado, a former Wells Fargo & Co. executive who now leads the Five Star Institute, a provider of educational programs for the mortgage industry.
More
* Mortgage Damage Spreads
* Foreclosure Crisis Slams Into Banks
* Big Banks Face Foreclosure Review
* Trustee in Bankruptcy Joins Foreclosure Case
The system has been further strained by failures and mergers of mortgage firms, as well as outsourcing parts of the job to law firms and other processors.
The consequences are causing a nightmare for the loan-servicing business and borrowers. For example, Fabiane Correa and her husband Luiz got a notice in September from Bank of America Corp. that the mortgage on their Stamford, Conn., house was in default. The couple also was told that $6,638 was past due.
Earlier this year, Mr. and Mrs. Correa got a loan modification from the Charlotte, N.C., bank as part of the Obama administration’s foreclosure-prevention program. She says they have made their required loan payments since then.
“It’s very emotional and frustrating,” Mrs. Correa says. The couple drove to Dedham, Mass., a 360-mile round trip, to meet with a Bank of America representative in an unsuccessful effort to resolve the problem. A BofA spokeswoman says the bank is looking into the matter.
Josh Ritz, who lives in Kent City, Mich., pulled $4,400 out of his retirement plan last year after Bank of America said he needed to pay that amount to catch up on his mortgage payments. He kept making his monthly payments until April, when a BofA employee said the bank didn’t want his money because the loan was past due, according to a court filing in Kent County, Mich., where Mr. Ritz is trying to block foreclosure.
Mr. Ritz and his wife “tried to do the right thing, and they came out worse,” says Karen Tjapkes, the couple’s lawyer. She adds that it took BofA about six months to apply the $4,400 payment to their mortgage account.
A BofA spokeswoman declined to comment, citing pending litigation, but said the company “will research his concerns and address them directly with Mr. Ritz and his counsel.”
Some bankruptcy-court judges have recently criticized loan-servicing operations for sloppy recordkeeping and dehumanizing customer service. Earlier this month, in a longstanding case U.S. Chief Bankruptcy Judge for the Western District of Pennsylvania Thomas Agresti said in a memorandum opinion and order that Countrywide Financial Corp. acted with “reckless disregard” in its treatment of a borrower who had successfully completed her bankruptcy and paid off all her debts.
The borrower, Sharon Diane Hill, was current on her mortgage, Yet Countrywide threatened to foreclose on her home if she didn’t pay thousands of dollars in additional fees, according to court filings. Ms. Hill “did everything right” but was still “put through a grinding process by Countrywide,” the judge wrote in his order. The mortgage industry should “take to heart just how devastating” its mistakes can be for borrowers, he added.
Countrywide was acquired by Bank of America in 2008. Since the acquisition, BofA said there have been revisions made to the bankruptcy-servicing process so as to avoid the errors noted by the court in its opinion.
A 2007 study of Chapter 13 bankruptcy cases by Katherine Porter, now a visiting professor at Harvard University Law School, found that the majority of mortgage claims made in bankruptcy court are missing at least one required documents. The study also concluded that fees are “often poorly identified, making it impossible to verify if such charges are legally permissible or accurate.”
The industry’s problems have been complicated by the transfer of loans from one firm to another as part of the securitization process and the demise of hundreds of mortgage companies during the financial crisis.
Alicia Lang, a graphics artist in Billings, Mont., says she was trying to refinance her $116,000 loan when mortgage company Taylor, Bean & Whitaker Mortgage Corp. collapsed in 2009. After making three payments to the servicer that took over the loan, she stopped because of trouble with the company’s website, expecting to get a letter about where to send her money.
Instead, an employee at another servicing firm, Ocwen Financial Corp., called saying he was a debt collector and she was behind on her loan. Ms. Lang says Ocwen had been sending mail to a house where she hadn’t lived since 2000. Her current house went into foreclosure proceedings this summer.
Yellowstone Bank, the Billings bank that made the loan, tried but failed to intervene on Ms. Lang’s behalf, according to a state-court lawsuit she filed earlier this month seeking to block a foreclosure sale originally set for next week.
Ocwen offered to restructure the loan, but Ms. Lang says the company refused to provide a detailed accounting of payments made to the previous servicer. The modification would have extended her loan to 40 years.
John Heenan, a lawyer representing Ms. Lang in her suit, says she has parked 10 months of mortgage payments in a trust account. “This is an extreme example of what happens … when people’s loans get bought and sold and repackaged,” he says.
On Friday, Ocwen delayed the foreclosure sale to give the company more time to look into possible resolutions, says Paul Koches, Ocwen’s general counsel.
Write to Ruth Simon at ruth.simon@wsj.com
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07.22.10
Posted in Montana Consumer Law at 4:18 pm by admin
Heenan Law Firm Assisting Hundreds of Montanans in Making Claims Against the $75 Million Trans Union Class Settlement Fund.
Major credit reporting agency TransUnion® has set aside $75 million to pay claims to people whose credit information was illegally sold to junk mail marketers. Time is of the essence- In order to make a claim from the settlement fund, you must file a legal claim before September 16, 2010.
If you had a credit card, home loan, student loan, car loan or other credit account in the United States between 1987 and 2000, you most likely qualify to make a claim. (This is virtually everyone who borrowed money over the age of 28). We are filing a combined lawsuit on behalf of hundreds of qualified Montana consumers. Under the Fair Credit Reporting Act, statutory damages can be as little as $100 and as much as $1,000.
The Heenan Law Firm will represent you on a pure contingency basis– that is, you pay no attorney’s fees, costs or expenses unless we make a recovery on your behalf. We take all the financial risk in connection with prosecuting your Trans Union Lawsuit – you cannot owe us a penny unless we win on your behalf, and then only to the extent we win.
If you wish to be a part of this case and protect your ability to recover from the $75 million fund, please fill out and sign this authorization form:
Trans Union Authorizaton to Represent
If you wish for us to represent you, we need the completed questionnaire and authorization form NO LATER THAN SEPTEMBER 6, 2010.
FAQ ABOUT THE TRANS UNION SETTLEMENT FUND CLAIMS
What’s this Case About?
More than ten years ago, numerous lawsuits were filed against national credit reporting agency Trans Union alleging it had illegally sold information about people to “target marketers,” who in turn sent people unsolicited credit card offers and other “junk mail.” (So, if you have ever received an unsolicited credit offer in the mail, it may be because Trans Union sold your credit information.) The lawsuits alleged Trans Union’s sale of people’s credit information violated the federal Fair Credit Reporting Act. Facing enormous possible statutory damages, Trans Union settled the case by establishing a $75 million fund.
How do I Make a Claim for a Share of the $75 Million Fund?
In order to make a claim for monetary damages from the settlement fund, you must file a legal claim in a court of law before September 16, 2010.
Will I Get Money from the Fund Even if I Don’t Sign Up to Pursue a Legal Claim?
No. Unlike a class action, you won’t receive any money unless you affirmatively file a legal claim. That is why we are working hard to assist as many possible eligible people get their share of the settlement funds.
Am I Eligible to Pursue a Claim?
You are eligible to sue for your share of the settlement fund if you had a credit card or line of credit (student loan, car loan, home loan, etc.) between January 1, 1987 and 2000.
How Much Can I Expect to Recover from the Settlement Fund?
We cannot guarantee whether or how much you will recover from the settlement fund. Statutory damages under the Fair Credit Reporting Act range from as little as $100 to as much as $1,000. We will be claiming the maximum $1,000 for each person who authorizes us to represent them, but whether and how much your actual share of the fund is will depend on a number of legal factors.
Will You Settle My Claim for More or Less than Someone Else’s Claim?
No. Pursuant to our fee agreement, we intend to jointly represent hundreds or even thousands of eligible claimants. We will attempt to negotiate a settlement where each of our clients receives the same monetary settlement.
How Much Does it Cost?
The Law Firm will represent you on a pure contingency basis– that is, you pay no attorney’s fees, costs or expenses unless we make a recovery on your behalf. We take all the financial risk in connection with prosecuting your Trans Union claim- you cannot owe us a penny unless we win on your behalf. Our fee is based on how much we recover for you, meaning it is in our own interest to get you the maximum recovery.
What if the Claim is Unsuccessful?
The lawyers will lose their time and money. You will not be out anything.
What is the Deadline to Pursue a Claim?
You must file a legal claim by September 15, 2010. If you want Law Firm to represent you, we need to receive your completed claim no later than September 6, 2010. Any claim forms received after that date will not be accepted by Law Firm.
When Can I Expect My Settlement Money?
Legal claims can take months or even years. We will not get paid unless and until you get paid, meaning it is in our own interest to get you a recovery as quickly as possible. Please be patient with us and know we are working to get you your monetary settlement as quickly as possible.
I have Friends and Family Who May Also be Eligible. What Should I Do?
We are making our friends and family aware of this special opportunity and hope you will do the same. We want to help as many eligible people as possible.
Does My Spouse Need to Fill Out a Separate Claim Form?
Yes. Everyone that wishes to preserve their right to recover against the settlement fund must fill out a separate claim, and will receive a separate settlement check upon successful resolution of the case.
Fill Out a TransUnion settlement fund authorization here:Trans Union Authorizaton to Represent
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05.07.10
Posted in Debt Collector Abuse, Montana Consumer Law at 3:14 pm by admin
The Better Business Bureau last week put out a consumer alert warning financially troubled families about misleading debt settlement company claims. The article is posted below. The Heenan Law Firm is actively prosecuting claims on behalf of consumers who allege they were mislead by debt settlement companies. If you believe you have been mislead by a debt settlement company, contact us to see if you may have a legal claim.
Arlington, VA – April 29, 2010 – Better Business Bureau is warning financially troubled families to beware of misleading debt settlement companies that claim they can easily reduce or eliminate credit card debt. Since the start of the recession, BBB has received more than 3,500 complaints from individuals, including many who paid hundreds of dollars in upfront fees to debt settlement companies but only fell deeper into debt.
“The debt settlement industry is flourishing and many families are being lured into believing that debt settlement is an easy fix and that their credit card debt will just disappear,” said Stephen A. Cox, President and CEO of the Council of Better Business Bureaus. “The truth is that the process doesn’t work for many consumers, it has potentially serious negative consequences, and should primarily be used as a last ditch effort to stave off bankruptcy.”
Consumers from all 50 states have filed complaints with BBB about debt settlement companies since the recession began in late 2007. In addition to BBB, angry customers are also taking their complaints to their state Attorney General. Attorneys General from Florida, Maine, Texas, Idaho, Missouri, New York, Illinois, West Virginia, Vermont and Minnesota have taken action against companies such as Dallas-based Debt Settlement America, Debt Rx USA, Financial Freedom of America and Credit Solutions—which has received more than 1,600 complaints alone in the last 36 months—and Austin-based Clear Your Debt and Swift Rock Financial Solutions.
Some practices by debt settlement companies are also coming under fire on Capitol Hill. On Wednesday, Senator Charles Schumer (D-NY) introduced the The Debt Settlement Consumer Protection Act which seeks to “protect consumers from deceptive, abusive and financially injurious practices rampant in the debt settlement industry.”
Typically with debt settlement (also referred to as debt negotiation), the consumer pays an upfront fee to the debt settlement firm with the understanding that the company will try to negotiate a settlement with creditors for less than what is owed. The debt settlement business works with the consumer to establish a plan for the consumer to put money into an account administered by the debt settlement company or a third party, and that money is used to pay any negotiated settlements. It will usually take at least six months to a year before there is enough money to start settling accounts, and during that time the consumer will typically not be making payments to creditors. Not only does this put the consumer at risk of having creditors file garnishments or other legal actions, his or her credit rating will likely suffer as a result of not making required monthly payments.
Complainants to BBB allege that instead of having their debt settled as promised, they were driven deeper into debt and sometimes sued by their creditors—which led to mounting legal fees—and had their wages garnished. Some complainants decided after making several months worth of payments that they did not want to proceed with the debt settlement process, but the debt settlement company did not give them their money back which they had set aside—in one case as much as $15,000.
BBB warns families that are drowning in debt to look for the following red flags when considering getting help from a debt settlement or negotiation firm:
- High upfront fees – Beware of companies that require large upfront fees before any debts are settled. Often, these upfront fees may be better used to reduce a consumer’s overall debt.
- Promises that are too good to be true– Some companies might promise that they can reduce debt by more than half even before looking into the customer’s financial situation.
- Claims that it’s a fast, easy and painless process. - Reducing debt through debt settlement takes time—often years—and can have a significant negative impact on the customer’s credit score. It can also expose consumers to lawsuits and garnishments.
Before enlisting the help of a debt settlement company, BBB recommends that struggling consumers:
- Contact their lender first. – Try to work out an agreement directly with your lenders before enlisting outside help.
- Seek help from a non-profit credit counseling center – Credit counseling centers can provide guidance for little or even no cost. You can find a credit counseling center near you at the National Foundation for Credit Counseling, www.nfcc.org.
- Consider debt settlement only as a last resort before filing for bankruptcy. The debt settlement process can take years and have a severely negative impact on your credit rating and can limit your access to future credit. In the meantime, your credit card company or other creditors can decide to take you to court and garnish your wages. It is best to avoid these potential consequences if you have other workable alternatives to dealing with your debt.
- Research the debt settlement firm with BBB first. Find out how many complaints it has received, how the firm responded to complaints and whether or not there are any recent government actions or lawsuits against the company.
More advice on managing credit and paying down high balances is available through BBB’s Managing Credit – Made Simpler at www.bbb.org/credit-management/.
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