TV ads abound for companies that promise to help you figure out better ways to handle your debts, but an action in Texas is a reminder that consumers need to use caution when selecting debt management companies.
'Debt management' company charged
Texas Attorney General Greg Abbott has charged a Dallas-based “debt management” firm with defrauding its customers.
The defendant marketed its services through a now-defunct website and direct customer e-mails, according to state investigators. Using purchased leads on individuals with debt-related problems, CAG allegedly contacted prospective customers claiming it would eliminate 20 to 60 percent of their outstanding balances within three years.
CAG promised that customers wouldn’t owe the firm “a dime” if the firm failed to deliver on its claims. However, the state’s investigation revealed that customers were charged up-front fees, sometimes up to 35 percent of the debt they owed, and that CAG failed to deliver on its services.
CAG customers were promised that their payments to the firm would be deposited into separate accounts that would be under their control and managed by the firm, according to court documents filed by the state. However, state investigators found that those promises weren’t honored and that CAG deposited/commingled customers’ funds into its own operating account. As a result, customers had no control over their own money.
In addition, court documents said Garner used customer funds to pay his personal bills.
CAG clients discovered they couldn’t receive refunds on advance fees paid, nor on the accumulated funds the defendant promised to hold in trust to help manage and resolve their debts, the agency said.
The Attorney General’s Office review of 52 CAG clients’ accounts – out of about 800 – showed that CAG owes these 52 clients more than $180,000 in escrowed funds alone.
So beware if you’re selecting a debt management firm. You don’t want to end up in worse financial condition because of the company you select to help you.
Consumer credit counseling
You can get free or low-cost help from a trained, certified counselor who will assist you in determine the best options for your financial situation. See the National Foundation for Credit Counseling’s website to locate a credit counselor near you.
Money management classes
April is Financial Literacy Month, and you can find classes on managing your finances in most states during Money Smart Week April 22 through 27.