Earlier this year, the Consumer Financial Protection Bureau THE CFPB: ALLY IN CONSUMER RIGHTS filed an enforcement action against Strategic Financial Solutions (SFS) in the Western District of New York. https://www.consumerfinance.gov/enforcement/actions/stratfs-llc-fka-strategic-financial-solutions-llc-et-al/. SFS had a variety of subsidiaries that offered debt – relief services. The CFPB alleged in its complaint that SFS and its subsidiaries violated the Telemarketing Sales Rule regarding the collection of fees for debt-relief services. We have met with numerous clients over the last year who have been enrolled with some of these debt-relief companies such as Great Lakes Client Services, Guidestone Client Services, and Guardian Litigation Group. In almost every situation, these debt-relief companies only made matters worse for financially – stressed consumers.
The debt-relief companies will promise to settle outstanding debts for a portion of what the creditor is actually owed. ARE CREDIT CARD COMPANIES REQUIRED TO ACCEPT LESS THAN OWED? They will instruct the consumer to discontinue all payments to credit card companies, and to direct those creditors to their company when they contact the consumer. In the meantime, the consumer will make a monthly payment to the debt – relief service, which is supposedly to be used for the settlement of their debts. Under the Telemarketing Sales Rule, these debt – relief companies are not allowed to take a fee until they have resolved at least one debt. In some cases, the suit filed by the CFPB alleges that these groups have taken fees before they have resolved any debts. We have seen instances where the debt – relief company will quickly resolve a small debt, so that they may immediately begin collecting their fees. In almost every case, the fee paid far exceeds the amount of work that was done. THE HIDDEN RISKS OF DEBT SETTLEMENT PLANS
In our experience, there are several national creditors who will not participate in any type of debt – relief plan and will immediately file a lawsuit once their debt has gone into default. Many of these debt – relief companies are familiar with the creditors who will not participate but choose not to share that information with their customers. 10 THINGS DEBT-SETTLEMENT COMPANIES WON’T TELL YOU These debt – relief companies will also advertise that they provide the services of an attorney in the event that one of the creditors chooses not to accept a settlement offer or participate in the debt – relief plan and chooses to file a lawsuit. In our experience, the attorney assigned by the debt – relief company will not actually defend the lawsuit but will only advise the consumer as to how to file a response on their own.
Many of the clients and prospective clients that we meet with were not aware that these debt – relief companies were subject to an enforcement action, as the monthly payments from their bank accounts continue to be taken out. The ones who were notified of this enforcement action have been given misleading information by the debt – relief companies that they had retained, both with respect to the monthly payments that were still being deducted and the ability to access those funds.
These companies purposely target consumers who are in financial difficulty and take advantage of their desire to work themselves out of tough financial circumstances without having to resort to bankruptcy. Even though the debt relief representative is not an attorney, they will use scare tactics to deter them from filing bankruptcy. COMMON BANKRUPTCY MYTHS REVISITED In almost every case, the debt – relief companies make their financial circumstances worse and leave bankruptcy as the only available option. Our firm offers a free bankruptcy consultation for potential clients in the state of Georgia, so if you find yourself in financial hardship, please give us the opportunity to explain your financial options before you embark on a debt – relief plan.