Vision Credit Education, Inc.

Debt settlement companies make some pretty amazing claims. It all sounds too good to be true. What we found is that is most cases, they fail to deliver what they promise. In some cases, they fail to do anything other than take off with all of your money!

We reviewed several prominent debt settlement companies to see what their track records are. Understand that in no way can we fully vouch for or warn against doing business with a debt settlement company. In fact, all we are doing is revealing public information about these companies and quoting their claims. In other words, we encourage you to investigate any debt settlement company fully before doing business with them.

We do offer a word of advice. The vast majority of debt settlement companies that we researched did not advertise using their real names. Most were not BBB Accredited. Even those that were BBB Accredited did not include the link to their BBB reliability reports, and for good reason.

Nightmare Debt Settlement

Beginning with some of the worst-case scenarios, these eye-opening accounts will definitely make you think twice before sending money to a debt settlement company:

• Hess-Kennedy: Several companies operated by Laura Hess did more than just fail to meet their false promises. $20 million in client deposits were actually transferred out of these companies. The situation was so bad that the State of Florida had to step in to seize the assets of the companies and arrange for partial refunds of clients. Capital One forgave the debt of former cardholders that were clients of Hess Kennedy. Instead, the courts will provide a payment of $1.825 million from the remaining assets of Hess Kennedy. Florida Attorney General Bill McCollum approved a settlement with Hess Kennedy that closed the companies, turned over remaining assets to Receiver Daniel J Stermer and ultimately led to a 5-year disbarrment for Laura Hess. Hess Kennedy of course had an “F” rating with the Better Business Bureau at press time.
• National Consumer Council: This debt settlement company was shut down by the Federal Trade Commission in 2004. The company claimed to be a tax-exempt nonprofit, but this was a false claim. According to court records, 98.6% of clients failed to complete their debt settlement program. Only 1.4% of the 44,844 clients were successful. The company’s court records show that only 1.4% of the consumers who signed up for the program ever completed it. Clients that dropped out of the program early paid an average of $1,780 in fees, money that could have been better used to repay creditors. National Consumer Council held an “F” rating with the BBB.
• Homeland Financial Services LLC: Another low was reached by this debt settlement company. As commonly occurs in the debt settlement industry, this firm began doing business under several new names once their BBB report became full of complaints. An injunction was filed in U.S. District Court. The partners subsequently agreed to close their businesses and pay fines totalling $110,000. Their BBB rating was of course an “F” rating. This company appears to be unrelated to another company in Colorado by the same name.

The One “Shining Star” of Debt Settlement Companies

In 2007, Debt Shield of Columbia, Maryland received the Torch Award for Marketplace Excellence through the Better Business Bureau of Greater Maryland. They were also a nominee for the International Torch Award. Debt Shield was the first debt settlement company to be considered for the award. To our knowledge, Debt Shield has the best reputation that we can find among debt settlement companies. And yet, their BBB rating was “F” at press time.

If you are looking for a recommendation for debt settlement companies, you will not receive one from us. Debt settlement companies profit handily by doing exactly what you could do on your own without paying thousands of dollars in fees.

Common Attributes of Debt Settlement Companies

Debt settlement companies have faced numerous regulatory challenges and legal actions due to widespread misrepresentation of their services. These are the most common problems, misrepresentations or false statements that have been challenged by regulators:

• According to the State of California, “The Consumer Protection Law Center failed to negotiate structured debt repayment plans on behalf of certain clients.”
• The State of Florida accused “Hess of signing thousands of credit card debtors up for debt management services and claiming the law firm would provide legal services to cancel debts for pennies on the dollar.”
• The Milwaukee Journal Sentinel reported that “On the advice of the company, the Jewells and other consumers stopped paying their creditors, with the understanding that the company would go to court and force a better deal. When that didn’t happen, the credit card companies sued. The Jewells said the Consumer Law Center told them they didn’t have to come to court, where a lawyer provided by the company would represent them. But no lawyer showed up in court for hearings on Sept. 19 or Oct. 2, and the judge issued default judgments against the couple. Because of the default judgments, the Jewells faced having a quarter of their wages garnished to pay back their debts, Brad Jewell said. They filed for bankruptcy on Wednesday.”
• The Wall Street Journal reported that Hess Kennedy “advised the 63-year-old to stop making payments to his creditors, according to Mr. Bowman. Mr. Bowman paid hundreds of dollars in up-front fees and made regular monthly payments of $249 to Hess Kennedy, but the Coral Springs, Fla., firm never settled any of his debts, he says. By the time he dropped out of the program this summer, Mr. Bowman says, his debt had ballooned to about $20,000, due to interest and late fees, and creditors were threatening to garnish his wages. Finally, he filed for bankruptcy last month.”
• Chase sued Hess Kennedy also on behalf of mutual clients, stating that “Defendants’ conduct is entirely in bad faith and serves no legitimate purpose. . . Defendants’ ulterior goals are to extract fees from card members who should be paying the money to Chase to satisfy their debts and to maliciously harass Chase in an improper (albeit unsuccessful) attempt to coerce the elimination of their clients’ legitimate debts.”

The bottom line is that debt settlement companies cannot do anything you cannot do on your own. They charge a hefty up-front fee and monthly fees even during months when they do nothing more than deposit your payment. When you actually settle a debt, most charge a percentage of the “savings” that can average anywhere from 15-25%. Once you factor in the taxable amount from forgiven debt that is reported to the IRS as well as the accrued interest and late fees, you barely save any money at all.

Another factor to be considered is the nature of debt settlement companies. Many are run by overpaid owners, many of which have questionable credentials and even criminal records. If you really want to settle your debts, find out how you can settle your own debts. A nonprofit credit counseling organization such as this one can show you how, for free. Also consider how late you are. If you are less than 6 months late on your credit card bills, you might want to consider debt management as an alternative to debt settlement.

If you would like to comment about your positive or negative debt settlement experiences, we encourage you to do so as long as you avoid any libelous statements! If you can prove your claim, then please state your case so that others can learn from your experiences. We want to provide a forum for reviews of your debt settlement companies.