NY AG Subpoenas Fourteen Debt Settlement Companies & One Law Firm In Nationwide Probe; Seeks To "Rein In A Renegade Industry"

From the Office of the New York Attorney General:

• Attorney General Andrew M. Cuomo [Thursday] announced a nationwide investigation into the debt settlement industry, subpoenaing fourteen debt settlement companies and one law firm.(1) Companies in the debt settlement industry often prey upon consumers who find themselves unable to keep up with credit card payments during these difficult economic times.

• “Today, millions of hardworking Americans are finding themselves imprisoned by debt. In response, a rogue industry has stepped in, offering consumers false hope, charging tremendous fees, and leaving them in a worse financial situation,” said Attorney General Cuomo. “Our mission is clear: to hold unscrupulous businesses accountable; to rein in a renegade industry; and to ensure that people are not victimized when faced with financial hardship.”

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• The subpoenas include requests designed to uncover the companies’ fee structures, how many people have benefitted from the companies’ services, and what kind of relief the companies are actually providing.(2)

In what appears to be an attempt to literally squeeze the blood out of aggrieved debtors, at least one of these firms has been accused of suggesting to the debtors to sell their blood plasma as an additional source of funds to apply towards their debt settlement "program," according to the press release.

For the entire NY AG press release, see AG Cuomo Announces Nationwide Investigation Into Debt Settlement Industry (Subpoenas Fourteen Debt Settlement Companies and One Law Firm in Connection with Probe; Debt Settlement Companies Often Charge Huge Fees for Misleading Plans, Suggest Selling Blood Plasma to Raise Funds, and Leave Consumers in Worse Financial Shape).

(1) The fifteen firms receiving AG Cuomo's "invitations to cooperate" are:

• American Debt Foundation, Inc.; American Financial Service; Consumer Debt Solutions; Credit Answers, LLC; Debt Remedy Solutions, LLC; Debt Settlement America; Debt Settlement USA; Debtmerica Relief; DMB Financial, LLC; Freedom Debt Relief; New Era Debt Solutions; New Horizons Debt Relief Inc.; Preferred Financial Services, Inc.; U.S. Financial Management Inc. (d.b.a. My Debt Negotiation); and the Allegro Law Firm.

Cuomo is also currently investigating Nationwide Asset Services, Inc., based in Phoenix, Arizona, and Credit Solutions of America, Inc., based in Addison, Texas, according to the press release.

(2) According to the press release, 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 precarious financial situation.

Some of the companies also urge consumers to seek additional sources of funds through means such as selling their blood plasma, mowing lawns, cutting down on car insurance, and borrowing from their neighbors and church. Even for those consumers who can meet the requirements set out by a plan, their amount of aggregated savings is ordinarily insufficient to settle their debts. As a result, many consumers find themselves worse off financially because of these debt settlement plans.