Allegro is one of many large debt settlement companies that skirt consumer protection laws. According to Alabama Attorney General Troy King, Allegro violated the Deceptive Trade Practices Act and the Sale of Checks Act.

Owner Keith Anderson Nelms plead guilty to violating multiple rules of professional misconduct. His Alabama law license was subsequently suspended.

Allegro failed to obtain a license from the Alabama Securities Commission, yet offered debt settlement services to Alabama residents. Approximately 175 of 15,000 total clients were Alabama residents.

Allegro made false, deceptive and misleading claims to customers in regards to its services. One such claim was that since Allegro was run by an attorney, that they would be able to achieve superior results over what other debt settlement companies could provide. The court came to a different conclusion:

Defendant’s debt settlement program failed to reduce consumers’ debt in most cases, negatively affected consumers’ credit ratings, and subjected customers to increased lawsuits and collection activities by creditors. It was deceptively unclear to Allegro consumers that Allegro Law would collect its fees in full before any funds were used to pay creditors.

In fact, the court found that instead of providing legal services as claimed, Allegro instead referred all cases to a third party that did not practice law, yet made claims to the contrary. This was a violation of the Deceptive Trade Practices Act.

These are the summary findings of the court in regards to Allegro:

(1)consumers were led to believe that Allegro Law, LLC was a law firm providing legal services, when in fact, consumers were not provided legal services; (2) consumers believed that Allegro was located in New York, when it was located in Prattville, Alabama; (3) consumers were not aware that they would be charged a fee of 16 percent of their total debt enrolled in the program and that 100 percent of their monthly bank drafts would go toward payment of that fee until the fee was paid in full; (4) consumers were deceived about the effectiveness of Allegro’s program and the certification of Allegro’s services; and (5) consumers were directed to stop making payments to creditors, which resulted in increased interest rates, late fees, further damage to their credit ratings, and additional and increased collection activities by their creditors.

Allegro clients are unlikely to see most of their money. It is unlikely that the court appointed receiver will receive substantially more than the $12 million seized so far. Splitting that $12 million between 15,000 unhappy customers would result in an average refund of $800. Once you count the legal bills of the receiver, the average could be far less.

For information about filing a claim for a refund, view the contact information for the court appointed receiver. Make sure you share your story so that you can warn others away from a similar fate.

Triangle Gives Back is an initiative of the Triangle Community Foundation, one of the fastest growing community service foundations in the Carolinas. What truly makes TCF unique is that they assist individual donors with planned giving while providing the oversight and accountability to ensure that those funds are being spent in a responsible manner to achieve the donor’s goals.

While the $250 grant itself is unrestricted, it will directly support our financial literacy efforts. Many of our clients are currently taking advantage of the free tax preparation through our Volunteer Income Tax Assistance (VITA) program.

We are finding that approximately 10% of our free tax clients are also taking advantage of a free budgeting session with a financial counselor, getting help with debt problems or getting started in our pre-purchase housing counseling program. We thank Triangle Community Foundation and their Triangle Gives Back initiative for the support they have shown in our programs. Thank you!

Which Accounts are Targeted?

If you charge more than $200 a month to your Citi card, then you likely will be spared this $60 annual fee. According to Citi, all of the letters were mailed out and affected cardholders have already received notification.

Accounts that are used less frequently and fall well below the $2,400 annual threshold are likely to see the fee. Citi did provide affected cardholders with the ability to reverse this fee:

However, because we value you as a customer, we wanted to give you an opportunity to have the annual fee credited back to your account.

Decisions to reverse the fee reportedly depend on the customer demonstrating that they do indeed charge close to that $2,400 annual threshold. Otherwise, it is likely that many of these requests will be refused.

The first annual fees are set to be charged on April 1, 2010. It is worth stating that this is not an April Fools joke!

If you want to opt out, the deadline is March 31, 2010. Here is the contact information:

Call Citi at 1-866-915-9425. If you choose to write them, include your name, address and account number in the letter:

What Was Amiss?

Specifically, I noticed that my credit card balance had increased from a $-17.53 to $46.47. Curiously, I wondered what was that $64 charge?

As a matter of habit, I routinely review all of my transactions to ensure that no fraudulent activity has occurred. A review of the account activity as well as the actual statements showed no transactions, yet the balance mysteriously showed that something had been charged.

The Culprit

My interaction with a Bank of America text chat specialist revealed the answer. This was her response:

please do not check the online banking balance as it is in correct.

The online banking is under maintenance and hence your are not able to see correct information.

Due to new card act that has been introduced, there will be a user friendly site for the customers to use it more efficiently due to that online banking is changing and there are lot of changes made I request you to do check it after 24 hours as we updating it as per the new card act from the federal government.

What she was referring to is the Credit CARD Act of 2009 that places new restrictions on financial institutions. It is expected to make usage of credit cards a bit less of a debt trap.

I was able to view the charge a few hours later. I will be sure to sign into my online account in a couple of days to see how they have changed the online experience. Hopefully it will make things even better.

What is VITA?

The Volunteer Income Tax Assistance program is a community service that provides a free alternative to costly tax preparation services. Volunteers are trained by the Internal Revenue Service to provide income tax preparation. They can file both federal and state income tax returns on your behalf. Since VITA is volunteer run and sponsored by numerous organizations, it is free to you.

Who Qualifies?

If your household income is below $49,000 for 2009, or if you are age 60 and above, you qualify. There is zero cost for you to participate.

Location

Wake County Human Services is hosting our VITA program at their Northern Regional Center. The address is 350 E. Holding Ave, Wake Forest, NC 27587. For information, call 1-919-338-0882.

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Times and Dates

No appointment is necessary. Volunteers are available Tuesdays from noon to 6:00 pm, and on Thursdays from 10:00 am to 4:00 pm. The services is available from Tuesday, January 26 through Thursday, April 15 for 2010.

How Long Does a Refund Take?

Most federal tax refunds are direct deposited within 10 days. There is no need for a refund anticipation loan or any other costly service to get your refund quickly. Again, there is no charge for this service.

Many of our tax clients report that they previously paid anywhere from $100 to $450 for tax preparation services. This year, you can get a bigger refund because no one is skimming their fees off the top!

What if I Live Outside of this Area?

You can still receive free income tax preparation from an IRS partner organization. If your area is served by the United Way’s 211 service, simply call 211 and ask for a referral to a free income tax service. Alternatively, you may contact the IRS at 1-800-829-1040 and ask for the closest location. Free services are available from both VITA and AARP Tax Aide partners.

The Purpose

When Capital One and any other credit card issuer encounters an account holder who falls 180 days delinquent, they are required by federal law to charge off the account as an uncollectible bad debt. This is written off as a loss, of which a portion is recovered by selling it to a debt collector.

Attorneys, debt buyers and collection agencies often purchase these accounts for pennies on the dollar and pursue collection activities against the debtor. There is no limit on how long they can pursue collection of the debt.

There is however a limit to how long they can pursue legal action against the debtor. The statute of limitations on a debt prevents a debtor from being sued over an old debt. A lender or their agent must pursue a judgment before the statute of limitations expires. This can vary considerably by state.

The AG’s office is specifically charging that Capital One extended what it claimed were credit offers to these debtors. However, it charged that many of these credit offers were for only $1. The catch was that the debtor had to transfer their old “expired” debt over to the new card, thereby re-aging the debt. Attorney General Darrell McGraw had harsh words for Capital One:

Capital One’s practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking.

Any debtor that agreed to this credit “offer” would be subject to new legal action on a debt that was previously off limits. They would have been at a disadvantage, since the old balance would once again be subject to fees and interest.  If the client wanted more available credit, they would have to pay down the old balance to well below the credit limit.

To further complicate matters, many of these accounts were charged a $59 annual fee. This annual fee was charged on the second billing cycle, thereby making account holders mistakenly believe they had more available credit. The annual fee would frequently cause clients to go over their credit limits, thereby incurring an over-the-limit fee.

West Virginia residents may contact the Attorney General at 1-800-368-8808 for more information.

Refund checks began going out December 30, 2009 and most customers whose claims were approved received their refunds by the second week of January. Refunds were far less than what people were hoping for.

It is a real shame that these families were victimized in their time of need by a company that misrepresented its capabilities. These families were promised savings of well over 50% on their debt. Instead, they lost 75% or more of their deposits due to fraud.

From a consumer protection perspective, I really feel for these families. I know that they have been robbed in the worst way, and that many of these families will not be able to recover from this financial blow anytime soon.

One difficult part is watching customers believe the outrageous claims made by Hess Kennedy and other debt settlement companies. The claims they make are often in violation of several state and federal laws.

However, the most difficult part of this entire situation is knowing that these families could have avoided the loss if they had simply checked the reputation of Hess Kennedy before signing a contract. If they had, they would notice that Hess Kennedy had an “F” rating with the Better Business Bureau.

I can promise you that if you choose to do business with a firm that has an “F” BBB rating, you are playing with fire. It is the government’s job to protect you from rogue companies, and they reacted by shutting down the Hess Kennedy and issuing refunds. However, tens of thousands of customers were still victimized. It is your responsibility to protect yourself, because government protections are not enough.

Therefore, please let the pain of these victims serve as a reminder to verify the claims of any company prior to doing business with them. For one, making sure the company is a bona fide charity is one helpful step. Most importantly though, see what their rating is with the Better Business Bureau. I personally shy away from any company with less than an “A-” rating.

A substantial number of companies that provide for-profit debt relief companies as well as some nonprofit charities are AADMO members. Many of these organizations will either join another trade association or become independent.

No reason has been provided for AADMO disbanding. AADMO has not issued a press release to confirm these reports.

AADMO reportedly is not renewing memberships for its members as of November 1, 2009. Members up for renewal after this date have begun to receive written notifications that AADMO is no longer renewing its memberships.

Many creditors that view trade association membership favorably will also have to make adjustments to account for the breakup of AADMO. Any AADMO members should refer all questions  to AADMO to receive clarification on their membership status.

* This story may be updated as more information is obtained.

Poor Timing

Citibank began mailing out thousands of notification letters on November 1 to notify cardholders that they would see their interest rates skyrocket to 22.99, 23.99 or higher beginning just 5 days before Christmas. This is poor timing at best, and is sure to upset a large number of account holders.

Not only are these rates substantially higher than the national average of 12.60% (Source: Creditcards.com) at the time of this article, they are variable. That means that as the prime rate increases, these rates will increase with it.

Fortunately, no one is expecting prime rate to increase for some time due to the weak state of the economy. That should at least be a minor reprieve. However, at 23% no one is sure to feel relieved.

Increase Does Not Affect Life of Balance Offers

Cardholders that took advantage of one of the special balance transfer offers which held the rate constant for the life of the balance should not worry. Those rates will not change as long as you keep your end of the agreement. The increase only applies to purchases and cash advances.

You should feel fortunate if you are locked in at a low rate for a balance. Those generous offers are history. Where 3.99% for the life of the balance was common just 2-3 years ago, their latest offer is 15.99% until January 1, 2011.

Such a move is likely to raise the ire of Representative Carolyn Maloney, who has steadfastly pushed for more rapid implementation of the Crdit CARD Act. While other banks have backed off a couple of months early, Citibank clearly is willing to take a chance of being targeted in order to lock in some extra profits for 2010 and beyond.

Right to Opt Out

If you would like to opt out, Citibank will allow you to keep your card open under the same terms until your card expires. In case you haven’t paid attention to your cardholder terms, your rate has likely already increased within the past year, meaning that opting out probably would not save you much.

While Citi may look bad for its untimely move, it should be noted that several other major credit card companies had increased interest rates months ago. Citi may be late to the party, but they have still embraced the interest rate increases that desperate cardholders have feared. It remains to be seen whether Citi will follow suit and adopt the changes mandated by the Credit CARD Act prior to the government imposed deadline.

So how do you know how much you are on the hook for as we bail out Wall Street, combat the housing crisis and deal with rampant unemployment? It depends on which figures you use.

When we consider that there were 156.3 million tax filers in 2008, that amounts to just over $9,000 per tax filer. Please note that this figure is double what the number is when dividing by the total U.S. population.

While that sounds like a lot, understand that 2008 was a record year for U.S. tax filings as there were added incentives to file for people who normally do not file a return. Remember the economic stimulus payments? Before the stimulus, there were only 136.1 million tax filers in 2006.

A substantial number of tax filers actually pay no tax. This is due to standard deductions and a slew of tax credits, many of which are refundable. It is a fact that the number of tax filers who owe no tax has been rising rapidly over the last several years, a number that many economists find unsustainable in the long run.

So exactly how many Americans actually pay income taxes? The number of Americans not owing income taxes has been rising rapidly, and according to many could reach even higher numbers over the next couple of years. One of those voices is Tax Foundation President Scott Hodge.

By 2012, if President Obama’s proposals on taxes, health care and climate change become law, families earning up to $109,000 will, as a group, be receiving more in federal spending than they pay in federal tax.

It is important to note that the portion of tax filers who do not owe has been rising rapidly through multiple White House administrations.

A recent CNN Money article states that 47% of households will owe no tax in 2009. That means that an estimated 80 million households will be responsible for the $1.42 trillion budget deficit. That comes out to $17,500 per household that actually pays tax. And yes, this is in addition to what we already owe from previous deficits.

So what does that mean for each of us? It means that we need to understand that promises by the federal government to take care of us in our old age sound good, but we need to prepare for life without government assistance. The expected shortages in Social Security are well known. Therefore it is our responsibility to live below our means, make intelligent purchases, and save and invest for the future.