Concerns raised over credit repair firm
By Deborah Adamson
Advertiser Staff Writer
After ignoring repeated phone calls from a credit repair company, Virginia Ross finally succumbed when the caller promised that her debt would be paid off 10 times faster.
"On their program, they said it would take 4.5 years instead of 42 years" to pay off her debt, said Ross. So she agreed on the phone to pay $696 a month (including a $39 fee) to Credit Foundation of America to cover her credit card payments.
After she received a written contract from the firm, she began to have doubts. The company said it needed three months to get her debt-consolidation plan started. During that time, Ross would have to send in the $696 each month and keep paying the minimum amounts on her credit card bills.
"I started thinking, this is a scam," said Ross, 40. "I felt I was being taken advantage of."
Ross is not alone. She is at least the fifth Hawai'i resident to complain about the business practices of the nonprofit Credit Foundation of America.
Nationwide, an increasing number of consumer complaints about credit counseling companies prompted the Internal Revenue Service and the Federal Trade Commission to announce this month that they have begun an investigation of the industry.
IRS Commissioner Mark Everson said that many debt counseling companies provide a valuable service, but some use the tax code to skirt consumer-protection laws.
The Hawai'i Department of Commerce and Consumer Affairs said it has referred three complaints from Hawai'i residents about the Irvine, Calif.-based Credit Foundation of America to the California attorney general's office. One complaint is still being investigated by the state.
Complaints included taking money from an account without authorization and not refunding the money of an unsatisfied customer.
Credit Foundation of America did not return calls for comment about these allegations.
No action has been taken against the company as yet.
Tom Dresslar, a spokesman for the California attorney general's office, said his state cannot force any firm to cease telemarketing calls to Hawai'i if no charges have been filed against it.
"Credit Foundation of America is continuing business as usual," said Wendy Burkholder, executive director of Consumer Credit Counseling Service of Hawai'i, a certified nonprofit debt counseling firm whose clients had been getting calls from Credit Foundation.
As for Ross, her problems didn't end when she stopped payment on the first $696 installment to the Credit Foundation of America. In an Oct. 6 letter, the company said she orally entered into a "binding" contract over the phone and must pay or "your account will be forwarded to a collection agency."
Even if she did sign a contract, federal law dictates that consumers can cancel within three days of signing with a credit repair company without paying any fees, according to the Federal Trade Commission.
Federal law also stipulates that a credit repair company cannot charge for services prior to delivering those services. One exception to that rule is nonprofits, prompting some unscrupulous companies to set up a nonprofit company as a front for their for-profit activities, said Thomas Grande, a Honolulu attorney specializing in consumer and healthcare issues.
To check on a company, call the state Department of Commerce and Consumer Affairs at 587-3295. To file a complaint, call 586-2653.
