AmeriDebt to Lay Off Most of Its Workers

earthlink news ^ | 10-24-03

[wheelgunguru]

BALTIMORE - Credit-counseling service AmeriDebt, accused of defrauding consumers and falsely portraying itself as a nonprofit, announced it will lay off most of its workers and stop seeking new customers because of recent "negative publicity."

Last month, Missouri sued AmeriDebt, accusing the company of defrauding indebted consumers of millions of dollars. In February, Illinois filed a similar suit against the company.

Earlier this month, the Internal Revenue Service and the Federal Trade Commission announced they would investigate nonprofit credit counseling services to make sure they serve consumers and qualify for their tax-exempt status. No specific firms were named.

AmeriDebt announced that as of Nov. 1 it will "cease outreach to new consumer clients in order to focus on serving the counseling and educational needs of its existing clients."

AmeriDebt counsel Zynda Sellers said Friday the Germantown-based company was "in the process of releasing most of its current employees," but she declined to say how many of its approximately 50 workers would be laid off.

"It's going to be very significant," Sellers said. "AmeriDebt is not happy about this. It's very unfortunate."

She said the company was also stopping all advertising.

Sellers declined to answer specific questions about the decision to stop seeking new customers, but she said in the statement: "For better or for worse, our ability to serve new consumer clients has been compromised by the negative publicity surrounding our organization. As a result, we believe that the only right thing to do at this point is to focus on the American debtors we already serve."

On its Web site, AmeriDebt said it has worked with 400,000 people - with more than 90,000 clients as of July.

Travis Plunkett, legislative director for the Consumer Federation of America, advised AmeriDebt clients to consider their options, including whether to look for another credit counselor.

"The big question from the consumer's point of view is, 'Has AmeriDebt made a promise they can't keep - to adequately assist their existing clients?'" Plunkett said. "It's legitimate for consumers to wonder if (AmeriDebt has) the financial resources and the staff to continue to help them."

Melissa Merz, a spokeswoman for Illinois Attorney General Lisa Madigan, said Friday that AmeriDebt's decision meant the swirl of government actions has had "a sobering effect on some of AmeriDebt's practices."

Missouri Attorney General Jay Nixon likened AmeriDebt to Dracula posing as a Red Cross worker, "using their not-for-profit shell as a marketing tool to lure in consumers - and often times consumers are more in debt after dealing with them."

AmeriDebt's decision to not accept additional clients "is a good sign for consumers," Nixon said. "Now, we could have fewer victims."

AmeriDebt said in the statement that it "hopes the current spate of inquiries into the operations of nationally operating credit counseling agencies will result in uniform pro-consumer reforms at the federal level."

Annually, an estimated 9 million Americans contact a credit-counseling agency - often the last resort for consumers before filing bankruptcy.

[E. Pluribus Unum]

If Ameridebt succeeds in negotiating lower interest rates for their clients, I fail to see the fraud.

People who run up big credit card bills aren't usually the sharpest blades in the shed. The aren't going to dig themselves out of their hole alone. They need someone to TELL THEM TO STOP SPENDING MONEY.

Running up credit card debt is theft from your future self.

[Monty22]

Debt consolidation rarely works. The only answer is typically bankruptcy. If you can't pay your debts without these companies skimming off the top, just go bankrupt and get it over with.

[steve86]

People who run up big credit card bills aren't usually the sharpest blades in the shed.

Quite a few, especially age 40+, have unavoidably run up large medical bills. No correlation with financial saavy or intelligence.

[Sender]

Actually, debt consolidation can and does work. It's just that the typical people who go into the program don't have the discipline to see it through.

They agree to pay off all their credit cards and make one lower monthly payment for a term of a few years, and if they do so without going into any new debt, they will indeed be debt-free much faster than they would have by paying the card leeches the minimum monthly payment.

What usually happens is that as soon as the program kicks in and they cut up their cards and suddenly have a little slack in the bank account, they go right back out and sign up for new credit cards and buy new cars, etc. Soon they owe big credit card bills PLUS the monthly consolidation bill...and then bankruptcy starts to look good.

I guess if these folks had the necessary discipline in the first place, they never would have ended up needing to call Ameridebt.

[concerned about politics]

Credit cards are unsecured loans. If you don't pay, what are they gonna do? Take all that .....nothing.....you put up for calateral? Gee, ouch!

Credit cards are very easy to get, very easy not to pay. If you're a Democrat living on social programs, you're home free. Go shopping! (and they know they can).

Victims of who? Themselves? They ran up their cards! Blaming others for not fixing it right? What the.....?

What am I missing here?

[Mr. Buzzcut]

Actually, debt consolidation can and does work.

Yep ... worked for me when i was young and stupid ... am finally free of credit card debt -- and credit cards ... if i can't pay cash, i don't buy it.

[concerned about politics]

if i can't pay cash, i don't buy it.

That's the wisdom passed on to us from our Dad. He says they'll trap you, and you'll become the slave (He also said small vehicles were death traps).
He caught my mother with a credit card. He didn't seem angry, but I remember him sitting in the living room cutting it into pieces with sissors. Poor mom.

[Agnes Heep]

AmeriDebt's commercials sicken me with their depictions of debt-ridden people living in huge McMansions, driving luxury cars and taking extravagant vacations--all while their creditors get screwed. What especially annoys me is their righteous indignation at the idea ... the very idea that their creditors might actually want to get paid for the things the leeches willingly contracted to buy.

[steve86]

Credit cards are unsecured loans. If you don't pay, what are they gonna do? Take all that .....nothing.....you put up for calateral?

Not sure what you're saying here. Banks sue people all the time for credit card debt, unsecured or not. Our local District Court (small area) handles 3-4 credit card lawsuits a week.

[wheelgunguru]

Credit cards are very easy to get, very easy not to pay

No kidding. I was so glad to discover Discover. Then I Discovered how fast I could max out. Then I Discovered I couldn't make the minimum payment. Now, they are trying to Discover my new address.

[The Magical Mischief Tour]

Credit card companies can sue you and win a judgment but you can declare bankruptcy just as easy and dissolve the judgments just as quick as you can dissolve your unsecured credit card debt.

Good friend of mine is an Attorney who handles 341 hearings for his firm all the time.

[steve86]

Credit card companies can sue you and win a judgment but you can declare bankruptcy

I don't disagree but some assets are protected through bankruptcy and others aren't...depends on state. Also, some of these defendants are deadbeats -- could pay but don't and are not in a position to declare Chapter 7 or 13.

[Flavius]

Thats bs. there are numerous complaints about the 'non profit' firms.

The information I was running into was that the firms would require a 250 deposit from the victim, the victim would then start to send money to firm instead to the Credit Company.

After a while Credit Company would call onto the victim and demand payment that is few months overdue.
At that point the firm would find ways to blame the victim. (Not clear on how they got away with that). But then again I’m not a crook or an Enron (or your favorite company) CEO.

That’s a rough sketch of the information I was reading about.

Similar scam is ran by a well know career counseling agency that targets 30k-60k job seekers, where you will pay a clown that will evaluate you and tell you where the 90% of the hidden job markets are.

Off course they will provide this service by you donating “thousands” of dollars to their fleecing. The lawsuits were typically against then because the smart victims were giving job lead to the firm and they would rarely be given a lead. The firm defended their scheme by saying that it takes time and money to convert a person and find leads.

Most of the time’s people are to embarrass that they have been scanned. I have not tried the ameritrade, but I did have an experience with the “career” firm. I did not pay a dime, but was happy to read about people way smarter then me getting ripped off. (Not happy they were ripped off just that smarter people then me were getting had, if that makes any sense.)

Peace

[Flavius]

bearwash, not saying what you said was BS.
Meant the articles and some comments how credit counseling is great.

CHPT 11/13 is the best most embarrassing way to go
Peace

[Monty22]

I'm having to go bankrupt. People think it's all the buyer's fault. Well, I didn't plan on the economy imploding, getting laid off, and having huge medical bills. I'm thankful that bankruptcy is an option.

[Brian S]

You walk into bankruptcy with your head held high. It's corporate America's option for "financial planning" and it should be yours also.

I could fill the page with "corporate American" bankruptcies that wiped the debt off their books and never missed a beat in their operations.

You shouldn't deserve any less.

[upchuck]

I was listening to a credit type talk show the other day and the hoist was ripping AmeriDebt and it's sound/work alikes a new one, suggesting that NO ONE uses these services. Instead he suggested National Credit Counseling Services which he said was REALLY interested in helping those in debt. I don't know about his recommendation as I've never needed to use one of these services (thnaks God!).

A poster earlier said, "If I can't pay cash I don't buy it." Wise words to live by. IMHO, you go into debt to buy a home, via a 15 year mortgage, and your first car. After that you pay cash for future cars.

[Flavius]

i've used NCCS they have this cool saying

stop spending money stup.d... and oh yeah dont spend more then you earn...

so yes the NCCS works great

[JoeBobJr]

I thought these companies were funded by credit card companies. Did that change recently?