Debt settlement firms face subpoenas
In this time of consumer money troubles, numerous debt settlement companies promise to make debts disappear. But New York Atty. Gen. Andrew Cuomo on Thursday called debt settlement “a rogue industry” and issued subpoenas to a law firm and 14 companies, including five in California, as part of an investigation of their business practices.
Cuomo said that debt settlement companies, which say they can negotiate reduced credit card and other debts, are “offering consumers false hope, charging tremendous fees and leaving them in a worse financial situation.”
The companies in California that were issued subpoenas are American Financial Service of Bakersfield, Debtmerica Relief of Santa Ana, Freedom Debt Relief of San Mateo, New Horizons Debt Relief of Aliso Viejo and U.S. Financial Management of San Diego.
A spokeswoman for Cuomo said the investigation was sparked by thousands of complaints from New York residents.
Robert Linderman, attorney for Freedom Debt Relief, said his company hadn’t received the subpoena and had no notice that it was coming.
“We’re delighted the attorney general is seeking information from the industry and look forward to working with him,” Linderman said.
He said Freedom Debt Relief doesn’t charge upfront fees, but he would not discuss the range of prices customers pay for its services.
An attorney for New Horizons Debt Relief, Jeff Tenenbaum, issued a short statement saying: “New Horizons is a company that puts tremendous emphasis on legal compliance, educating clients and not making deceptive or misleading claims about its services.”
An attorney for U.S. Financial said the company had no comment; the other companies didn’t respond to phone calls.
Cuomo accused companies in the industry of making unfounded advertising claims, including that they could reduce credit card debt as much as 75%.
A settlement plan could require unrealistic payments for people who are broke, he said, yet the companies urged clients to raise money by selling blood plasma, cutting down on car insurance and mowing lawns.
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