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Credit "Solutions"--Crook Alert!!

Updated on May 20, 2009

Debt Settlers Offer Promises But Little Help NYTimes 4-20-09

Everyone with a credit card debt problem should read the article by David Strietfeld linked below before signing up with Credit "Solutions" or other debt settlement companies. Streitfeld tells the sad story of Tyna Carter who had $25,000 in credit card debt and wound up in the hands of a "sweet talking" credit specialist from Credit Solutions in Texas which accomplished nothing for Ms. Carter but scammed her out of $4,000.

Approximately 2,000 debt settlement companies are operating in the United States, triple the number of a few years ago and state attorneys general are being flooded with complaints about them. The situation has been exacerbated by recent big interest rate increases by the major credit card companies--CitiGroup, Wells Fargo, and Bank of America.

According to Strietfeld the premise of debt settlement is as follows: the debtor stops paying even the minimum on his credit card balance. Instead he accumumlates money in an account that the settlement company promises to use to strike a bargain with the creditors. Confronted with the certainty of some money now versus the possibility of no money later, the creditor settles for 40 cents on the dollar.

In practice, what usually happens is that once the creditor stops making payments step up collection efforts. In the meantime interest and penalties pile up in the customer's account, and his credit rating plummets.

LONG BEFORE MAKING ANY ATTEMPT AT A DEAL WITH CREDITORS, THE SETTLEMENT COMPANIES TAKE A FEE. CREDIT SOLUTIONS DEDUCTED $233 FROM THE CARTERS' CHECKING ACCOUNT FOR THREE MONTHS, AND THEN $116 A MONTH FOR THE NEXT 27 MONTHS--A TOTAL OF AB OUT $3,825 BY EARLY THIS YEAR.

[It's prudent to be wary of giving automatic access to your bank account to ANYONE. These decuctions are easy to start but can be hard to stop when the promised services don't materialize. Once a scammer gets your money you'll never see it again! Bankruptcy for many people is the best option.]

"AFTER THEY GOT THE MONEY, THEY RAN," SAID MRS. CARTER, 51.

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    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      9 years ago from Birmingham, Michigan

      I have a dream house

      By Elizabeth Jacobson

      From an affidavit by Elizabeth Jacobson, a former loan officer at a Maryland branch of Wells Fargo, submitted in support of a federal lawsuit brought by the city of Baltimore against the bank. The city filed the lawsuit in January 2008, claiming that Wells Fargo targeted African Americans in Maryland for high-interest subprime mortgages, which have since forced many homeowners into foreclosure. The affidavit was submitted in June. Asked for comment, Wells Fargo said that it believes the “lawsuit lacks merit” and stated that “race is not a factor in the pricing and products we offer.”

      I worked directly with loan applicants to make subprime loans. Much of my business came from referrals from Wells Fargo loan officers who were on the prime-loan side of the business. These loan officers were known as “A reps.” For several years I was the top subprime-loan officer at the company. My pay was based on commissions and fees from making these loans. In 2004, I grossed more than $700,000 in sales commissions.

      The commission and referral system at Wells Fargo was set up in a way that made it more profitable for a loan officer to refer a prime customer for a subprime loan than make the prime loan directly to the customer. I knew that many of the referrals I received could qualify for a prime loan. It was in my financial interest to figure out how to qualify referrals for subprime loans. Moreover, in order to keep my job, I had to make a set number of subprime loans per month.

      There were various techniques that were used to qualify the A-rep referrals for subprime loans. One way was to tell customers not to put any money down on the loan and borrow the entire amount, even if they could afford a big enough down payment to qualify for a prime loan. Another technique would be to tell the customer that the only way to get the loan closed quickly would be to submit it as a subprime loan. Some A reps actually falsified loan applications in order to steer prime borrowers to subprime-loan officers. One means of falsifying loan applications that I learned of involved cutting and pasting credit reports from one applicant to another. I was also aware of subprime-loan officers who would cut and paste W-2 forms. I reported this conduct to management and was not aware of any action taken to correct the problem.

      Federal Housing Administration (FHA) loans, like other government-insured loans, offered lower interest rates that are closer to prime rates. Subprime-loan officers were required to have a subprime borrower sign a “Benefit to Borrower” statement that stated that the borrower may qualify for a government-insured loan but did not want it because it was too much paperwork. In fact, subprime-loan officers were never trained in how to make FHA or government-insured loans. We asked for this training, but Wells Fargo refused to provide it.

      I know that Wells Fargo Home Mortgage tried to market subprime loans to African Americans in Baltimore. I am aware from my own personal experience that one strategy used to target African-American customers was to focus on African-American churches. Wells Fargo had a program that provided a donation of $350 to the nonprofit of the borrower’s choice for every loan the borrower took out with Wells Fargo. Wells Fargo hoped to sell the African-American pastor or church leader on the program because Wells Fargo believed that church leaders had a lot of influence over their ministry and in this way would convince the congregation to take out subprime loans with Wells Fargo.

      I remember being part of a conference call that took place in 2005 where Wells Fargo sales managers discussed the idea of going into black churches in Baltimore to do presentations about our subprime products. On that call we were told that we “have to be of color” to come to the presentation. The idea was that since the churchgoers were black Wells Fargo wanted the loan officers to be black. I was told that I could attend only if I “carried someone’s bag.” Subprime-loan officers did not target white churches for subprime loans. When it came to marketing, any reference to “church” or “churches” was understood as code for African-American or black churches.

      I complained many times about what I thought were unethical or possibly predatory loan practices that Wells Fargo was engaged in. Managers never took any action to respond to my concerns. In my office we morbidly joked that we were “riding the stagecoach to Hell.”

    • profile image

      ColdWarBaby 

      9 years ago

      I don't know if it's your intention Ralph but with hubs like this you expose the inherent flaw in the capitalist system very clearly.

      From a fundamentalist capitalist viewpoint, these companies are exemplary.

    • eovery profile image

      eovery 

      9 years ago from MIddle of the Boondocks of Iowa

      I am seeing these popping up. It is really suspicious, when they call you and they have a weird accent. If this is not obvious

      Keep on Hubbing!

    • Hawkesdream profile image

      Hawkesdream 

      9 years ago from Cornwall

      Thanks Ralph for making me aware of what can go on, many feel that these 'solution' companys are the answer, but clearly not all of them are, it certainly will pay to check them out first.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      9 years ago from Birmingham, Michigan

      The disease has many roots.

    • Vladimir Uhri profile image

      Vladimir Uhri 

      9 years ago from HubPages, FB

       

      Ralph, I think we see only solution of symptoms and not the root of the disease.  :-).

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