THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
MICHELLE SINGLETARY|THE COLOR OF MONEY

Giving a debt-settlement company power-of-attorney is a 'very slippery slope'

January 3, 2009
  • Email|
  • Print|
  • Single Page|
  • |
Text size – +

One desperate reader e-mailed me asking for help in persuading her husband not to pay a Florida debt-settlement company an upfront $895 fee. The company promised to help cut the $21,000 they owed in credit card debt.

"My husband was recently contacted on the phone by a company alleging it was a 'debt reduction' organization," she wrote. "They are willing to guarantee a $3,000 reduction or our money back. They have power-of-attorney forms to be notarized. . . . Is this a good idea?"

I suspected working with that company wasn't a good idea. There were just too many red flags. I won't name the company because I don't want my warnings to be just about this firm, but about the growing practice of debt settlement.

I contacted Gail Cunningham, senior director of public relations for the National Foundation for Credit Counseling. Here's what alarmed us:

  • The company initiates contact. "They possibly purchased a list of consumers who were delinquent on their debts," Cunningham said. "Companies target vulnerable people who are desperate to get out of debt."

  • The company requires a large upfront payment. Why doesn't it occur to people to use the money to pay down the debt?

  • The firm provides a guarantee for something it can't possibly control.

  • A company wants them to sign power-of-attorney forms. Cunningham says often in these types of deals customers are told to stop paying their bills and instead send money to the debt-settlement outfit to save up for a lump-sum offer. However, customers are often not informed of the risk of stopping payment and that creditors might still take legal action.

    The debtor is instructed to have no contact with the creditor, and that the settlement company will take over. That's why they need to get the power of attorney. "This is a very slippery slope," Cunningham said.

    I also did a general search for the company on the Internet. On www.ripoffreport.com, a consumer complaint website, I found some disturbing comments from customers of the same Florida-based company. While sites like this are helpful, you do have to consider that many legitimate business dealings leave customers unhappy. Nonetheless, the comments about the company were insightful.

    Additionally, search the Better Business Bureau database. I went to search.bbb.org and did a "Reliability Report" on this company. The BBB has given the firm a D rating, because of the short time it has been operating and the number of consumer complaints.

    I sent all this information to the woman in Rochester. She and her husband are going to take my advice and contact a nonprofit credit counselor at www.debtadvice.org.

    Michelle Singletary is a syndicated columnist. She can be reached at singletarym@washpost.com.

    © Copyright 2009 Globe Newspaper Company.
    • Email
    • Email
    • Print
    • Print
    • Single page
    • Single page
    • Reprints
    • Reprints
    • Share
    • Share
    • Comment
    • Comment
     
    • Share on DiggShare on Digg
    • Tag with Del.icio.us Save this article
    • powered by Del.icio.us
    Your Name Your e-mail address (for return address purposes) E-mail address of recipients (separate multiple addresses with commas) Name and both e-mail fields are required.
    Message (optional)
    Disclaimer: Boston.com does not share this information or keep it permanently, as it is for the sole purpose of sending this one time e-mail.