Jun 8, 2009 5:00 pm US/Eastern
3 On Your Side: Debt Settlement Dangers
PHILADELPHIA (CBS 3) ―
Lots of people are behind on their credit card payments during these tough economic times. But that doesn't mean you should sign up with one of those companies that promise to get you out of debt. As Your Money Team helps you to survive in '09, 3-On Your Sides Jim Donovan has a warning.
You may have heard the testimonials or seen the online ads, companies claiming to get you out of debt by negotiating with your creditors for you. Well, you may not want to take them up on their offer.
Doreen Melton and her husband Barry signed up with Nationwide Assets Services (N.A.S) to pay off $15,000 of debt.
Doreen says, "It sounded so good."
But in the end, it didn't save them money, it cost them thousands! Over the course of two years, the couple says they paid NAS more than $11,000, including $1,800 in upfront fees. But the company only settled slightly more than half of their original debt.
Doreen says, "It's very upsetting because our credit is destroyed."
New York Attorney General Andrew Cuomo says N.A.S promised nearly 2,000 (1,981) customers a 25 to 45 percent reduction in their debt, but only 64 customers who completed the original plan, got that savings.
According to Cuomo, "the companies that we're talking about today frankly are frauds."
Cuomo has filed a lawsuit against N.A.S and another company, Credit Solutions of America, which he says promised nearly 18,000 customers a 60 percent reduction in their outstanding debt, but only around one percent of the customers, 1,800 people, received that savings.
Cuomo says, "Not only did they do nothing, but they made a bad situation worse."
Now Doreen is warning others.
She says, "No matter how good it sounds or what they tell you, they're lying. There's no possible way they can do what they say they will."
Doreen and her husband say N.A.S. refunded $3,000 after they went to the Attorney General's office, which says these two debt settlement companies engaged in fraudulent business practices and false advertising.
Nationwide Asset Services denies any wrong doing and Credit Solutions of America disputes the complaints which they say largely occurred under previous management.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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