The New York Times, June 17th, 2010
Editor’s Note: Caveat Emptor, as always…
For the companies that promise relief to Americans confronting swelling
credit card balances, these are days of lucrative opportunity.
So lucrative, that an industry trade association, the United States
Organizations for Bankruptcy Alternatives, recently convened here, in
the oceanfront confines of the Four Seasons Resort, to forge deals and
plot strategy.
At a well-lubricated evening reception, a steel drum band played Bob Marley
songs as hostesses in skimpy dresses draped leis around the necks of
arriving entrepreneurs, some with deep tans.
The debt settlement industry can afford some extravagance. The long recession
has delivered an abundance of customers — debt-saturated Americans,
suffering lost jobs and income, sliding toward bankruptcy. The
settlement companies typically harvest fees reaching 15 to 20 percent of
the credit card balances carried by their customers, and they tend to
collect upfront, regardless of whether a customer’s debt is actually
reduced.
State attorneys general from New York to California and consumer
watchdogs like the Better Business Bureau say the industry’s proceeds
come at the direct expense of financially troubled Americans who are
being fleeced of their last dollars with dubious promises.
Consumers rarely emerge from debt settlement programs with their credit
card balances eliminated, these critics say, and many wind up worse off,
with severely damaged credit, ceaseless threats from collection agents
and lawsuits from creditors.
In the Kansas City area, Linda Robertson, 58, rues the day she bought
the pitch from a debt settlement company advertising on the radio,
promising to spare her from bankruptcy and eliminate her debts. She
wound up sending nearly $4,000 into a special account established under
the company’s guidance before a credit card company sued her, prompting
her to drop out of the program.
By then, her account had only $1,470 remaining: The debt settlement
company had collected the rest in fees. She is now filing for
bankruptcy.
“They take advantage of vulnerable people,” she said. “When you’re
desperate and you’re trying to get out of debt, they take advantage of
you.” Debt settlement has swollen to some 2,000 firms, from a niche of
perhaps a dozen companies a decade ago, according to trade associations
and the Federal Trade Commission, which is completing Read more of this article.

