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By Thomas Caywood
The Boston Herald
Sunday, March 28, 2004
They pose as charities dedicated to rescuing people
drowning in debt, but more and more so-called credit counseling
agencies are just rip-off outfits pushing costly and often unnecessary
debt-consolidation plans, regulators and consumer advocates warn.
``There's really in recent years emerged a new breed of credit
counseling organization that makes misrepresentations to consumers
and is putting them on debt management plans without regard to
their financial situation,'' said Jessica Rich, assistant director
of the Federal Trade Commission's financial practices division.
The FTC and the Internal Revenue Service issued a rare joint consumer
alert in October urging people to be wary of shady credit counselors
- many of which tout their nonprofit status to project an aura
of trustworthiness.
``We are finding more and more aggressive for-profit firms that
are masquerading as nonprofits and gouging consumers,'' said Travis
Plunkett of the Consumer Federation of America. ``They are misleading
them, not telling them about all the charges. Other times, they
are just scamming them.''
Struggling under $12,000 in credit card debt after her husband's
business failed, Dolores Porziella of Hyde Park turned to a Florida-based
credit counseling agency expecting it to get her sky-high interest
rates lowered.
``They just collect your money,'' Porziella said. ``It was like
$40 a month to handle the account, and they had all these other
fees for things they wanted you to purchase.''
Reputable credit counseling agencies meet with their clients to
work out budgets. The shady ones offer only telephone counseling,
if that, and then go right to a debt-management plan to consolidate
the client's bills for a fee.
Mel Stiller, chief executive officer of Consumer Credit Counseling
Service of Southern New England, an accredited agency with a long
track record, said two out of three clients don't need debt consolidation.
``What really distresses me about this is the consumer who really
needs this other help, the budgeting help, is not getting it,''
Stiller said.
Boston bankruptcy lawyer Daniel Gindes hears horror stories from
clients who, desperate to avoid bankruptcy, signed up with a credit
counseling agency.
``I heard about one that took $3,000 from someone for a set-up
fee, collected a bunch of money and never paid any of the bills,''
Gindes said.
Gindes said many of his clients pay thousands into debt-management
plans only to end up in his office paying him to declare bankruptcy.
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