Sunday, May 28, 2006

Debt Consolidation Companies - Still as ugly as they used to be

Some of my readers have written to me complaining that I am singling out one company, AmeriDebt, unfairly. Have I singled AmeriDebt out? Yes I have. Unfairly? I think not.

Something else to watch out for - the title "debt consolidation company" itself received so much bad press that some of these companies have repackaged themselves as "debt negotiation" companies or "debt settlement" companies. Are they as bad as debt consolidation companies?

They are worse, using tactics that are not legal. Stay away from these types of companies.
Many debt consolidation companies are in hot water these days: they are being sued by numerous attorney generals, the FTC and the IRS is investigating their supposed "non-profit" status. We recommend against doing business with any debt consolidation company, but if you really feel you want to risk your credit and money you don't have, check it out with your local consumer protection agency and the Better Business Bureau in the company's location.

Several debt management companies are also touting the fact that they have A+ ratings with the better business bureau. One note about the BBB ratings: A good rating may mean absolutely nothing. 75% of the complaints received by the BBB are considered resolved (and don't count against the company's rating), which means that the debt consolidation company answered a letter or call from the BBB, gave whatever story they wanted, and if it sounded reasonable, the BBB, marked it closed.

The BBB has no authority to investigate complaints nor resolve them. I've received numerous complaints about companies who show up with good BBB ratings. (There is a lesson here, it's good to complain to me, but why not also complaint to the BBB, your state attorney general or the FTC?) Most people don't go the extra mile when they have been taken by any company, preferring just to grumble. Others are so new that there hasn't been time to lodge complaints. Should you look up their standings anyway? Sure.

We've identified the following companies as being debt management companies, and because of the fact that they are debt management companies, we advise against them. Want more info? Here's a great article by the Consumer Federation of America.

Please note: Several debt consolidation companies have told their customers that if their name does not appear on this list, that it is a stamp of approval. Don't believe them! These guys change names so fast it's hard to keep this list up to date! Want to see a list of all the companies about whom we've received positive comments? Here it is.

1st Federated Consolidation
1 Stop Debt Consolidation
4A Debt Consolidation (see the explanation above)
A1 Debt Consolidation
AIM Debt Consolidation
Allied Debt Consolidation
Amalgamated Credit Counselors
Amansco Credit Services
American Debt Consolidation - epinions rating
Amerix - read the opinion of someone who worked there.Oh and FYI, this company was started by the founder of Genus. Read more.
Budget Planning Services
Cambridge Credit (or
Consolidated Client Services
Christian Debt Consolidation (Or any name with "Christian" in it. I mean really, - how scummy can you get to play the religion card?)
Credit Advisors
Credit Solutions of America (They have a good BBB rating.) We've also received a nasty-gram letter from them threatening legal action if we don't remove their name from this list.
Credit Solutions Phoenix
Debt Consolidation Alliance
Debt Consolidation Online
Debticated (AmeriDebt's for-profit company division)
Debt Management Credit Counseling Corp - click on this link to see the info we have on them.
Debt Management Enterprises
Debt Management
Debtscape (formerly Neway, which is also AmeriDebt)
Debt Settlement America
Debt Solutions USA - they weren't on this list until the owner contacted me and demanded to be taken off the list, and I did research on them. They are based in Florida (one of two unregulated states in this area - danger) and have had 3 complaints lodged against them with the BBB (according to the owner), though they were "resolved". Their BBB rating is good, though. See my note above about resolved BBB complaints. Also known as (listed below)
Debt Specialist Network
Debt Zappers
Delray Credit Counseling
Financial Freedom Southwest

Freedom Debt Relief - BBB reports satisfactory listing, but complaints about this company have been filed with them, though the BBB says they were resolved satisfactorily. Other notes: this is a new company and has an alias, (FREEDOM FINANCIAL NETWORK, LLC). We've also received a nasty-gram letter from them threatening legal action if we don't remove their name from this list.

Fresh Start America

Genus - Read about them in the Washington Post and Business Week.

Gibson Trust - we received a letter from a reader who was ripped off by HomelandFinancial and wanted to warn other about these guys. They also operate under:, and
Integrated Credit Solutions
Jabez Financial Group Inc.
Jubilee Financial Services Inc.
Lighthouse Credit Foundation
National Consumer Resource Center
National Debt Network
Neway - Actually, this is AmeriDebt masquerading under another name - even their websites are identical
Norstar Consolidation (aka Debt Solutions USA, see above)
Paramount World Inc. Debt Consolidation Services
Union Financial Services

I would avoid any of the companies listed above or any other company that resembles them. Why? Because, in my opinion, they are ALL bad. Run, don't walk from them.

Some of the companies above advertise prominently that they are non-profit, but others don't even bother to do that. Why is non-profit a convenient masquerade? Business Week did a great article on debt management companies on October 29, 2001, and found all kinds of nasty details about how non-profits can be highly profitable.

For instance, the CEO of Genus was found to be making a over $300,000/year salary. AmeriDebt directed $2.2 million dollars worth of business to for-profit operations owned by officers of AmeriDebt.

One final note, since the states of Florida and Maryland don't regulate this kind of consumer service, watch out for any company doing business out of these states.
I get so many letters asking me which of these companies I would recommend.

My answer: Stay away from ALL of them. Whatever they can do, you can do yourself. However, if you still feel compelled to seek one out, here is our tipsheet. If you are already enrolled in one, then here are some tips to get out. Again, be very cautious. Before you do business with any company, check it out with your local consumer protection agency and the Better Business Bureau in the company's location.

Have we said not to use any of these debt consolidation/debt negotiation/debt settlement companies enough? I counted four times. Hopefully, you will take our meaning.

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