Missouri Attorney General Chris Koster has taken legal action against a Texas debt settlement company, filing a lawsuit against Credit Solutions of America for illegally charging consumers for debt relief services the company never provided, his office announced in a press release last week (“Attorney General Koster Files Suit to Stop Company for Falsely Promising Credit-Card Debt Help,” June 2, 2009).

Credit Solutions of America, based in Richardson, Texas, advertised that it could cut consumers’ credit card payments in half, reduce their other monthly bills, and get them out of debt within three years, Koster says. But although the company collected hefty fees from consumers with the promise of delivering those debt reduction results, Koster charges that Credit Solutions of America never provided the advertised debt relief services, leaving its customers in a worse financial situation than before.

According to the Attorney General, Credit Solutions of America charged its customers fees that amounted to about 15 percent of their total debt, collecting those fees through an initial upfront payment and then through subsequent installment payments that it took directly from customers’ bank accounts.

The state of Missouri prohibits companies from collecting fees for credit services prior to the services being performed in full. Moreover, says Koster, the company wasn’t even legally registered to do business in the state.

“Credit Solutions of America promised real relief to consumers who were in financial straits because of high credit card debt,” Koster said. “We will continue to aggressively pursue the unacceptable business practices of these companies that offer false promises and deliver only harm.”

Get debt relief information from a trustworthy debt relief company

.

Popularity: 12% [?]

A new report shows that consumers are charging less to their credit cards while also paying down the balances on those cards. (more…)

Popularity: 15% [?]

Two debt settlement companies have been sued by New York Attorney General Andrew Cuomo on behalf of 20,000 New York consumers, as part of Cuomo’s probe into the debt settlement industry. Credit Solutions of America, Inc. in Texas and Nationwide Asset Services, Inc. in Arizona are both facing charges of fraud, deceptive practices, and false advertising, Reuters reports (“New York AG Sues Texas, Arizona Debt Settlement Firms,” May 19, 2009).

CSA is accused of defrauding 18,000 New York customers out of about $17 million in fees over a five-year period from January 2003 to September 2008.

Through marketing and advertising campaigns CSA promised to reduce customers’ debt by 60 percent, but Cuomo’s office found that only an average of 1 percent of CSA customers actually saw these results.

CSA, the self-proclaimed largest debt settlement firm in the country, instructed its customers to make monthly contributions to a savings account instead of making their debt payments and to ignore calls from creditors, which often drove customers further into debt and failed to result in a successful resolution. The New York Times reports that the debt settlement firm even suggested that its customers sell their blood plasma, mow lawns, and borrow from their neighbors to drum up funds for their savings account (“2 Firms Accused of Fraud in Debt Settlement,” May 19, 2009).

Lawyers representing CSA said the debt settlement company “disputes liability over the complaints and supposed practices” because the alleged fraud occurred during a 12-month period when the company was under different ownership. The company has also faced litigation in South Carolina, Idaho, and Texas.

Cuomo has also charged Nationwide Asset Services with falsely advertising that it could reduce customers’ debt by 25 to 40 percent. But of the 18,000 New York customers it enrolled between January 2005 and May 2008, Nationwide settled the debts of less than 2,000 of these customers.

“Today’s lawsuits send a clear message that we are prepared to rein in this unregulated industry and protect New Yorkers who are proactively trying to work their way out of debt,” Cuomo said in a statement released by his office (“Attorney General Cuomo Sues Debt Settlement Companies for Deceiving and Harming Consumers,” May 19, 2009).

Cuomo’s two lawsuits are part of a larger probe of the debt settlement industry announced earlier this month in which he subpoenaed 17 debt settlement companies in addition to Nationwide and CSA.

Popularity: 18% [?]

After you’ve packed away all your winter coats, scarves, and turtlenecks and dusted off all your t-shirts, shorts, and flip-flops for spring, keep that spring-cleaning momentum going and tackle your bills, your financial files, and your debts. By taking better hold of your finances, you may be able to find ways to save throughout the rest of the year. (more…)

Popularity: 7% [?]

Lawmakers are attempting to resurrect the Credit Cardholders’ Bill of Rights legislation that died in the Senate last year in an attempt to provide relief for indebted credit card holders, reports Inside ARM (“Credit Cardholders’ Bill of Rights Gets New Life in Congress,” March 25, 2009).

Introduced by Sen. Sheldon Whitehouse, D-R.I., and Sen. Richard J. Durbin, D-Ill., H.R. 627 would protect consumers from credit card companies’ predatory lending practices by limiting their exorbitant interest rate increases.

“The standard credit card agreement gives the lender the power to bleed their customer through evolving and ever more crafty tricks and traps,” Sen. Whitehouse said in a Senate hearing last week (“Debating a Ceiling On Credit Card Fees,” The Washington Post, March 25, 2009). “Under this business model, the lender focuses on squeezing out as much revenue as possible in penalty rates and fees, pushing the customer closer and closer to the edge of bankruptcy.”

The proposed legislation would apply to those companies that raise card rates higher than 15 percent plus the current yield of a 30-year treasury bond, which is currently set at 18.5 percent.

Federal Reserve regulations set to go into effect in 2010 that will target predatory lending practices by credit card issuers would be expanded under the new Credit Cardholders’ Bill of Rights:

• Prevent credit card companies from arbitrarily increasing interest rates on existing card balances

• End the practice of “double cycle” billing that currently allows creditors to charge interest on debt that consumers have already paid on time

• Prohibit lenders from advertising “fixed” rates unless the rates aren’t subject to change, or unless the fixed-rate period is clearly disclosed to the consumer

• Forbid lenders from applying cardholder payments to higher interest rate debts last

• Force creditors to accept payments made the following business day when the bills’ due date is a Sunday or a holiday

• Require creditors to offer more reasonable cut-off times for on-time mailed payments

While banking industry advocates admit that some card issuers have engaged in harmful practices , they say the industry as a whole has not overstepped its bounds and that cardholders issuers could be hurt rather than helped by the new legislation.

If the bill passes, “the market response would simply be to restrict credit, raise interest rates and fees or both,” said Kenneth Clayton, senior vice president and general counsel of the American Bankers Association’s Card Policy Council, in a letter to the Senate subcommittee. “This would significantly hurt tens of millions of Americans at the very time they can least afford it.”

Popularity: 13% [?]

Lenders looking to collect on high-interest credit card debt from bankrupt consumers could soon be forced to negotiate better repayment terms with these consumers if key democratic senators are successful in pushing new bankruptcy reform legislation through Congress. (more…)

Popularity: 14% [?]

Credit card holders just barely bucked year-end credit card trends at the end of last year, charging less than expected and making slightly more of an effort to get caught up on their credit card balances compared to 2007, according to a recent anonymous survey of 27 million random TransUnion credit profiles. (more…)

Popularity: 7% [?]

A father and son duo from Ohio, whose credit card debt relief scheme caused consumers to lose more than $2 million, have been sentenced to the maximum federal prison terms offered as part of their plea bargain (more…)

Popularity: 12% [?]

Consumers are hurting. Already battered by tightened access to credit, rising unemployment, and unaffordable mortgage payments, consumers are also contending with soaring credit card interest rates and fees. (more…)

Popularity: 6% [?]

Americans may want to mark Feb. 14 on their calendars for a reason besides Valentine’s Day; it’s the last day consumers will be able to access their FICO credit scores on myFICO.com with Experian credit data included, The New York Times reports (more…)

Popularity: 9% [?]