Debt Renegotiation Scams Not Limited To Foreclosure Rescue, Loan Modification Firms As Illinois AG Hammers Settlement Outfits In Separate Civil Suits

From the Office of the Illinois Attorney General and the Illinois Department of Financial and Professional Regulation:

• Attorney General Lisa Madigan and Acting Secretary of the Illinois Department of Financial and Professional Regulation (IDFPR) Michael T. McRaith warned consumers facing significant credit card debt about the risks of debt settlement offers as she announced two lawsuits filed against debt settlement firms.(1) Attorney General Madigan's lawsuits allege that these companies engage in deceptive marketing practices, charge excessive fees and do little or nothing to improve consumers financial standing.

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• Madigan said her office has seen an increase in advertisements for debt settlement companies that promise to significantly reduce consumers credit card debt and provide them with an alternative to bankruptcy protection. Typically, after consumers enroll in debt settlement programs, the companies charge excessive upfront fees and advise consumers to stop paying their credit card bills. Despite this advice, the debt settlement companies fail to begin negotiations with consumers credit card companies for several months. As a result, credit card companies add fees and penalties to consumers credit card balances and often even begin collection efforts to recoup the debt, all of which puts the consumers in a worse financial situation. In many instances, while consumers were enrolled in debt settlement programs, credit card companies have sued the consumers to collect the balance on the consumers accounts.

For the entire Illinois AG press release, including a summary of the specific allegations against each outfit, see AG Madigan Sues Two Debt Settlement Firms (Attorney General, IDFPR Warn Consumers About Firms Promising to Reduce Credit Card Debt).

(1) AG Madigan sued the following defendants:

• 1st lawsuit: SDS West Corporation, an Aliso Viejo, Calif.-based debt settlement agency; Bruce Hood, the Chief Operating Officer of SDS West; SDS West's Chief Executive Officer, Raymond Dorso; Nationwide Support Services, Inc., an Irvine, Calif.-based debt settlement servicer; and Joanne Garneau, President of Nationwide Support Services.
• 2nd lawsuit: Debt Relief USA, Inc., a debt settlement firm based in Addison, Texas and Kelly E. Reilly, the President of Debt Relief USA.