- The Washington Times - Wednesday, March 24, 2004


Senate investigators have found that consumers drowning in credit-card debt increasingly are being victimized by poor service, hidden charges and high fees charged by some credit-counseling agencies that often leave them even deeper in debt.

Former employees of Cambridge Credit and AmeriDebt Inc. told a Senate hearing yesterday about having to use fake names, “sweatshop” sales operations and pressure on commission-paid counselors to get consumers to pay stiff upfront fees, with no counseling or debt education provided.

Officials of the two companies disputed the accounts of the former customers and employees.

Chris Viale, chief operating officer of Cambridge Credit, called them “unfair and distorted accusations.”

“There is a popular notion that performance incentives encourage counselors to act in their own best interests rather than in the interests of consumers. This is not true,” Mr. Viale said.

Consumer complaints are on the rise as new companies get into the counseling business and abuses proliferate, according to a report released by the bipartisan investigative panel of the Senate Governmental Affairs Committee. The investigators found a pattern of abuse among some counseling agencies, especially new entrants to the field.

“Clearly, something is wrong with the credit-counseling industry,” said Sen. Norm Coleman, Minnesota Republican, chairman of the investigative subcommittee. “Our investigation has revealed common patterns of improper conduct” by new entrants.

With personal bankruptcies surging to record levels in this country, there is a deep pool of customers for credit-counseling companies — often the last stop before a bankruptcy filing. Credit counselors historically have been financed by banks that issue credit cards, but those contributions have been declining, forcing counseling agencies to charge fees.

AmeriDebt has been sued by the Federal Trade Commission (FTC), five states and consumers.

The FTC charges that the company used deceptive marketing to bilk hundreds of thousands of customers and failed to educate people about how to get out of debt. The regulators also said the Germantown-based company made customers think that an initial fee would be part of their debt-reduction payments to creditors — but it instead went to AmeriDebt.

The company has disputed regulators’ accusations. It says that it offers customers educational services and that the debt-reduction payments are “voluntary contributions.”

The Senate subcommittee report said the investigation “has revealed that AmeriDebt is not the only potential ‘bad actor’ in the industry. Indeed, many of AmeriDebt’s practices represent a pattern of abuse among several new entrants in the credit-counseling industry.”

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