NY press coverage from the USOBA conference !

http://www.nytimes.com/2010/06/19/business/economy/19debt.html?pagewanted=1&emc=eta1

MUST READ THIS ARTICLE!

Finally, more and more Debt Settlement Companies are going out of business due to the new regulations. I will will have more info in the days to come. Stay tuned! www.nwcdr.com

This article according to the Chicago Times today:

We have all seen the tan- talizing ads promising economic salvation.

And for the indebted among us, they are oh so tempting.

“Be Completely Debt Free in 12- 36 Months!”

“Debt settlement can help save you thousands!”

“Picture yourself debt-free!”

Your gut is right on this one: It’s almost always too good to be true.

Much of the so-called debt-settlement industry in Illinois, and across much of the country, resembles the Wild West. The industry — which, for a significant fee, works with credit card companies and other creditors to reduce debt for consumers drowning in it — has exploded in the last few years.

And it faces almost no regulation in Illinois. There are no licensing requirements, no caps on fees, no rules forbidding deceptive advertising practices. That must change, which is why we support, in concept, a bill backed by Attorney General Lisa Madigan that tightly regulates the industry. The bill has passed the Illinois House and now faces uncertain prospects in the Senate.

We like much about the bill, including its strict approach on licensing, refund requirements, public disclosure and its ban on deceptive advertising promises. But we fear it goes too far in limiting the fees debt-settlement companies can collect.

The debt-settlement industry worries this will put legitimate firms out of business. We don’t think the industry is crying wolf.

There are, it’s important to emphasize, reputable debt-settlement companies out there that provide a valuable alternative to debt consolidation and bankruptcy for some Americans. These companies are pushing for regulation nationwide and support most of the provisions in the Illinois bill, which is sponsored by Rep. Marlow Colvin and Sen. Jacqueline Collins.

Legitimate firms want to put the fly-by-night operations under; they want to push aside the crooks who give them a bad name. But they are balking hard at the Illinois bill’s fee structure, which limits upfront consumer costs to $50 and bans further payment until the company reaches settlements with the consumer’s creditors. The bill caps the final fee at 15 percent of the savings achieved from settling a debt.

The industry says this is too stingy. They need money upfront to pay employees, keep the lights on and pay rent. They also think the 15 percent contingency fee is too low. Without independent auditing of this industry, we can’t assess that assertion.

Still, we think the industry makes a point, and we urge Madigan and Collins to work with it to find a middle ground — a way to allow for modest payments upfront and a larger payment at the end that allows for reasonable profit.

That said, we strongly reject the “pay as you go” model backed by the industry, where consumers pay 17 percent to 20 percent of their original debt in monthly installments, all to be paid before settlements are reached with all of a consumer’s creditors.

The bulk of payment should be made after the firm has delivered for the consumer. One industry trade association admits 65 percent of consumers drop out before all debts are resolved. Often, consumers lose what they’ve already paid in fees. The attorney general’s office contends that dropout rate is much higher.

A middle-ground model bill has been drafted, in consultation with the industry and consumer advocates, by the Uniform Law Commission, a nonpartisan organization that is funded by the states to write model legislation. It’s a good starting place for negotiations on a fair fee structure.

Debt-ridden consumers desperately need protection from scam artists who take their money and run, leaving consumers deeper in debt than when they began.

But this legislation appears to go overboard, potentially putting legitimate businesses at risk.

With a little give on both sides, we believe both consumers and debt-settlement companies will end up better off.

BUFFALO, N.Y. (October 15, 2009) – Attorney General Andrew M. Cuomo today announced that his office has won a lawsuit against a national debt settlement company, barring the company from doing business in New York state unless it posts a $500,000 performance bond to protect consumers. The decision also levies nearly $200,000 in penalties against the company for defrauding thousands of New Yorkers who looked to the company to negotiate reductions in their personal debt.

You should look into debt consolidation credit counseling before considering debt settlement. http://www.nwcdr.com/what_is_debt_consolidation.htm

As a result of the lawsuit filed in May, the Hon. Patrick H. NeMoyer in Erie County Supreme Court issued a decision that bars Nationwide Asset Services, Inc. (NAS), based in Phoenix, Arizona, along with its affiliates, from doing business in New York state unless it files a $500,000 performance bond to protect consumers. Additionally, Cuomo’s office obtained a civil penalty of $198,100 after the court determined that nearly 1,981 consumers were defrauded.

The court found that the majority of NAS customers were promised a 25 to 40 percent reduction in their outstanding debt but never saw such reductions. Only one-third of one percent of consumers received such savings. The other customers suffered continued harassment and lawsuits by creditors and had their credit ratings destroyed.

“This company made promises to people who were searching for financial help and trying to turn their lives around,” said Attorney General Cuomo. “But the promises never came true and, in many cases, New Yorkers were left in worse condition than when they started. Thanks to this ruling, the company has to put its money where its mouth is with a performance bond if it wants to do business in New York.”

The court’s decision also orders NAS to compute restitution for 180 consumers who successfully completed the program but actually paid more in fees and settlements than the amount originally due on their debts. NAS has been ordered to compute this consumer restitution and the specific amounts will then be verified by the Attorney General’s Office and the court.

The Attorney General’s investigation and suit determined that NAS and its affiliates, ServiceStar LLP and Universal Debt Reduction, LLC, and its marketer, FGL Clearwater, Inc. d/b/a American Debt Arbitration, based in Florida, engaged in fraudulent and deceptive business practices and false advertising and made significant profits by selling misleading debt settlement plans that very rarely delivered the promised benefits to consumers dealing with debt.

Debt settlement companies represent that they can substantially reduce consumer debt by negotiating directly with creditors, on behalf of their customers, to pay off outstanding balances at less than the amounts owed. However, Attorney General Cuomo’s Office has found that many of these debt settlement plans are often flawed and, based upon complaints, often mislead consumers about the nature of their services. The debt settlement plans are generally premised on consumers’ aggregating savings, over one to three years, from which both the payment of the company’s fees and any negotiated settlement are to be made. Yet most consumers who are targeted by these companies are unable to meet the savings requirements because of their already-precarious financial situation.

In addition, the companies often take their substantial fees up-front and keep these fees even when they do not provide the promised services. As a result, many consumers find themselves worse off financially because of these debt settlement plans.

As part of his broad investigation of the debt settlement industry, Cuomo issued subpoenas to multiple debt settlement companies and affiliated businesses. The investigation has sought to uncover how these companies structure their fees, how many people have actually benefited from their services, and what kinds of relief are the companies actually providing.

Many consumers may benefit more from working directly with their creditors, seeking credit counseling, or consulting an attorney about filing for bankruptcy. Additionally, even when enrolled in a debt settlement plan, consumers are often still subjected to collection efforts and lawsuits filed by their creditors. Consumers are even told not to discuss their debt situation with creditors.

Earlier this year, Cuomo launched a Web site – www.NYDebtHelp.com – that explains consumer rights, allows victims of debt settlement companies quick access to the Attorney General’s office to file complaints, and outlines the stages of the Attorney General’s investigation. Consumers who believe they are being defrauded by a debt settlement company are urged to contact the Attorney General’s office at 800-771-7755 or www.oag.state.ny.us.

The lawsuit against Nationwide Asset Services, Inc. was handled by Assistant Attorney General James Morrissey under the supervision of Russell T. Ippolito, Assistant Attorney General-in-Charge of the Attorney General’s Buffalo Regional Office and J. David Sampson, Deputy Attorney General for Regional Affairs.