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Wednesday, April 16, 2014
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Published: 9/21/2003

Preying ‘credit counselors'

With “pre-approved” credit applications flooding people's mailboxes, no wonder consumers are plagued with debt. Not surprisingly, that has led to a growth in “credit counseling” operations and one of them is the target of lawsuits that claim the outfit really is for-profit, after all.

Attorneys general in Missouri and Illinois have had it with AmeriDebt, the Germantown, Md., firm whose commercials dominate cable TV with claims that it's a nonprofit operation which simply exists to throw a lifeline to Americans drowning in debt.

Instead, says Jay Nixon, Missouri attorney general, the company's supposed plan to help consumers get their debt under control is rife with “high, hidden fees and lack of any significant credit counseling.”

So recently Missouri filed a lawsuit charging that the firm makes bogus claims to defraud consumers. Illinois has filed a similar suit.

The Missouri attorney general said that while AmeriDebt advertises that it has no up-front fees for consumers, it conceals that a consumer's first monthly payment goes to AmeriDebt and its affiliates. The fee usually averages 3 percent of the total debt, which is frequently around $327.

This is the kind of deal that should cause consumers to remember the old adage “if it seems too good to be true, it probably is.”

The Missouri lawsuit also objects to the firm's use of the terms “credit counselors” and “debt professionals” and says the workers are mere amateurs. Well, most people are “debt professionals” to some degree because nobody needs training in how to get into debt or let their debt load balloon out of control.

That too few people can control their spending is why every year about 9 million Americans call a credit-counseling agency. Of course, that figure is probably a fraction of those who have a problem. It's so easy to get into financial trouble when credit is so easy to obtain, and looking for help from credit counselors is usually the last step that debt-burdened consumers take prior to filing bankruptcy.

At least consumers who contact such agencies are trying to get out of the mess they created. Yet the unsuspecting, desperate consumer should be advised because, as these lawsuits warn, there are some phony “credit counselors” out there preying on them.



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