Who Can You Trust?

CCCS Issues Consumer Warning After Second State Sues AmeriDebt, Others

A local credit counseling agency issued a warning to consumers Thursday to be wary of a new breed of credit counselors advertising in the South Texas area.

The alert was prompted by news that the state of Missouri filed suit against AmeriDebt, charging the company with defrauding consumers of millions of dollars. Illinois had filed a similar lawsuit against AmeriDebt in February, 2003. Consumer Credit Counseling Service of South Texas said consumers should be cautious, and even suspicious, when dealing with any credit counseling agency. For consumers who choose the wrong agency, the results can be devastating, cautioned Kim Womack of CCCS. "Their reps and ads make all kinds of promises about cutting interest and lowering payments," said Womack, director of education. "Unfortunately, what they promise and what they can deliver may be entirely different," said Womack, director of education.

The Missouri Attorney General's Office alleges that AmeriDebt fraudulently made millions of dollars through excessive and deceptive fees while falsely pitching itself as a nonprofit organization. In a press release, Missouri AG Jay Nixon said the Maryland-based company secretly functions a profit-driven company in which their untrained "counselors" act more like "commission-collecting peddlers." "Unfortunately, with its high, hidden fees and lack of any significant credit counseling, AmeriDebt has served more as an anchor than a life preserver for many consumers," Dixon said. In addition to AmeriDebt, the Missouri lawsuit also names Debticated Inc. and Debtworks Inc., and other for-profit groups.

CCCS of South Texas is a nonprofit, United Way agency and a member agency of the National Foundation for Credit Counseling (NFCC), the country's largest and longest serving nonprofit national credit counseling network. From financial education to debt management, NFCC member agencies have trained and certified credit counselors who offer financial planning and debt reduction services that are free or low-cost. To help consumers choose wisely, CCCS of South Texas and the NFCC issued a list of questions to ask credit counseling agencies:

Quality Assurance/Credibility

-Are they nonprofit? How are they funded? -Is the agency accredited by a reputable third-party organization? Are they affiliated with a national organization like NFCC to help assure they maintain quality standards and good client service? -Are their counselors certified or trained in basic money management services? -How long has the company been in business? What's their record of client success? -Have complaints been filed with the Better Business Bureau or State Attorney General?

Fund Management and Safety -How are client funds collected and disbursed to creditors? -What policies are in place to assure the protection of client funds? -Do they retain any client payments for their company? -Are clients fully credited for all and full payments to creditors?

Service Delivery

-What fees does the agency charge? Do they fully disclose their fees up-front? -Will they work with all my creditors, regardless of whether they are financially supporting the organization? -Is counseling offered in person or by telephone? Does the consumer have a choice? -Does the agency provide financial management or budget counseling in addition to debt management services?

CCCS also encourages indebted consumers to ask their creditors for help and referrals. "Creditors are aware of predatory credit counselors operating out there. If the creditor can't offer substantial relief, they can make recommendations about agencies they know are reputable," said Womack. She also added that consumers must do some research before choosing an agency. "Going on a debt management plan is a major decision that should not be entered into on a whim," warned Womack.

CCCS of South Texas, founded locally in 1969, provides confidential counseling, guidance, debt repayment services, and educational programs. To schedule an appointment in any South Texas office, call 800-333-4357 or visit their Website at http://www.cccsstx.org.