Credit Counseling Company Leaves Some Deeper in Debt

August 23, 2009 12:00:00 AM PDT
Americans are falling deeper and deeper into debt and looking for help to get out. On average, Americans owe nearly 130 percent of what they make in a year. One company offers to get people out of debt, but often leaves them further in the hole.This is the sound of success according to Credit Solutions, the largest debt settlement company in the country. Employees ring a bell every time they persuade a credit card company to settle somebody's debt for less than what they really owe.

But thousands of unhappy customers have complained. Karen Moore said all she heard was silence "I had absolutely no contact with them for over a year."

Karen was deep in debt two years ago when she saw an ad for credit solutions on T.V. The commercial claims, "We dramatically reduce your debt and get you out in three years or less."

"When you signed up with them, what did they tell you to do with your bills?"

"They told me, well they told me first of all, not to pay anything," said Moore.

"Nothing?"

"Nothing. To stop making payments."

Karen remained in the Credit Solutions program for 20 months. During that time Credit Solutions did not initiate a single debt settlement for her, but it deducted its own fee each month, 15-percent of Karen's total debt. "I'm out of pocket $2,088 dollars, and nothing to show for it."

Karen's not alone.

The better business bureau has collected more than 1,500 complaints, attorneys general in three states have filed suit, and there's a class action suit on behalf of potentially thousands of former customers.

ABC News asked Heather Carmichael, Vice President of Credit Solutions, "Can you tell me what percentage of clients pay you and never get a debt settled?"

"That's a great question. I don't have that number, but I can certainly look at it for you." Carmichael never did answer that question. But she defended her company's business practices. "We have a proven track record of success, and hundreds of thousands of people who have successfully completed our program."

Credit Solutions blames its legal troubles on a one-year period from December 2006 to December 2007 during which the company was under different ownership.

"What percent of your customers make it all the way through the program?"

"I wish I had an answer for you. But that's something I'd have to look up," said Heather Carmichael.

"You're the VP of operations and you don't know the answer?"

"No, I don't know."

"What percentage of your customers do you manage to settle at least one debt for?"

"Another great numbers question; I don't have a specific answer to that."

But the New York Attorney General says he does, alleging Credit Solutions settles debts for only one percent of its customers in his state.

Another Credit Solutions customer said this letter was sent to him in 2007. It suggests that he, quote, "lend from church" or "sell plasma" to earn money to pay his debts.

Credit solutions said the document is not currently used by the company.

"I just wonder, does credit solutions hurt some people more than it helps them?" Heather Carmichael: "I wish it were that easy. These are customers that are having a crisis. The people that we help - our employees become grief counselors on day one. There are no easy solutions to those little plastic credit cards that are out there. But we are a big part of the solution for many consumers out there."

But Karen Moore said the company was not the solution for her.

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