Commissioner Mintz Warns New Yorkers to Beware of Fee-Based Debt Settlement Companies

NEW YORK — Debt settlement companies lure people struggling with debt by claiming that they will convince creditors to settle debts for less than what’s owed.  However, it rarely works. Companies charge high fees and counsel consumers to ignore their debts, which can cause lasting harm. 

In March, New York CIty Department of Consumer Affairs (DCA) Commissioner Jonathan Mintz today declared debt settlement the top fraud of the year. 

 DCA cautions consumers about these services and encourages them to know their rights and the latest rules about debt settlement. 

FREE HELP FROM NYC

 In an effort to provide New Yorkers with a safe way to deal with debt, the city offers a network of Financial Empowerment Centers, which provide free, professional one-on-one financial counseling.  Commissioner Mintz made the announcement at a press conference with the Federal Trade Commission, the Better Business Bureau and other Federal and State agencies and organizations in order to alert New York area consumers to the top consumer complaints of the past year and to educate them on how to avoid becoming victims of these and other scams in 2011.

“Debt settlement companies aggressively market false hope to vulnerable New Yorkers who  fear they have run out of options to get out of debt”, said Commissioner Mintz.  “In reality, settlement companies only cause further harm, using dangerous strategies that result in mounting late fees and long-lasting damage to credit scores, on top of their own fees. I encourage New Yorkers struggling with debt to visit one of the City’s free Financial Empowerment Centers where they can meet one-on-one with a professional counselor to tackle their debt.”

CREDIT CARD DEBT

According to DCA’s Office of Financial Empowerment (OFE)’s Citywide Financial Services Study, nearly one in five (18 percent) New York households has credit card balances of more than $10,000.  Nationally, about one in eight (13 percent) households has balances in that range. 

DCA received more than 660 complaints against debt collectors last year, making it the Department’s number one complaint for the third year in a row. 

And almost 60 percent of the nearly 8,900 clients who visit the City’s Financial Empowerment Centers come seeking help with debt.  DCA has been advocating at local, State, and Federal levels for comprehensive bans on fee-based debt settlement and related predatory services.

The City’s network of more than 20 Financial Empowerment Centers provides free, one-on-one, confidential, and multilingual professional financial counseling to New York City residents. 

Counselors help clients with money management, budgeting, credit counseling, negotiating with creditors, finding affordable banking services, debt management, government benefits screenings and more.

Since the pilot Financial Empowerment Center opened in June 2008, the Centers’ financial counselors have helped more than 9,300 clients pay down nearly $4 million in debt. 

HOW TO GET HELP 

For complete list of Financial Empowerment Centers, visit nyc.gov/ProtectYourMoney or call 311.  To file a debt settlement complaint, contact the New York State Banking Department at 1-877-BANK-NYS.