21
Jul 2010How "Avoid Bankruptcy" plan avoids Virginia consumer protection law
Posted by Robert Weed / in Virginia Bankruptcy / 4 comments
After talking with a lady yesterday, we’ll call her Jerri, I went to the website of Greenshield Financial Services. Here’s what they say they do: “Greenshield Financial Services is a Financial Health Management Company serving individuals seeking debt relief or debt help by offering debt settlement programs as an alternative to bankruptcy.”
Jeri had a set up fee for Greenshield Financial Services of $3500–paid as $900 over four months. And then a monthly management fee of $425. A total of over $7000.00 had been paid to these people as their fee to help Jerri with debt settlement.
As a result of their work, two small credit cards had been settled. Jerri saved less than $1000 total. Spending $7000 to save $1000 is not exactly a good alternative to bankruptcy. She figured that out when the sheriff brought around court papers from some of her bigger credit cards, that had not settled their debts through Greenshield.
At first, I thought it was a violation of Virginia law. Virginia law says a debt management program can’t charge more than $75 set up and $60 per month.
Now $3500 is a whole lot more than $75–and $425 per month is more than $60. But Greenshield is not covered by the law.
Here’s how they avoid the law. To be a debt management program under Virginia law, the debt negotiator needs to collect the money from the consumer and pass it on to the creditor. Greenshield works out the settlement, but the creditor take the money directly from the consumer’s account. As long as Greenshield never touches the money, they aren’t covered by the law. So they can charge as much as they can talk people into paying. Which, in Jeri’s case, was a lot.
(And no, she is not likely to avoid bankruptcy.)
Leigh Anne
I have seen so many clients be scammed out of what little savings they have by these “debt negotiators”. Other States have figured out that these companies are nothing more than well dressed thieves: http://www.collectionsrecon.com/collection_news/vt-attorney-general-alleges-debt-relief-firms-often-make-things-worse/
…hopefully Virginia does as well.
Robert Weed
The Federal Trade Commission announced new regulations today, to limit the fees charged by these guys, if they solicit or accept business over the telephone. http://www.ftc.gov/opa/2010/07/tsr.shtm. (My thanks to L Ilaine Upton, bankruptcy lawyer in Fairfax, for passing this on.)
The New York Times quoted David Leuthold, the executive director of the Association of Settlement Companies, saying most companies will go out of business because of this. They should, too.
Robert Weed
The Federal Trade Commission got a Federal court to shut down one of these operations this week. http://www.collectionsrecon.com/press-releases/at-ftcs-request-court-shutters-international-credit-card-debt-reduction-operation/.
They were charging people $995 with a “guaranteed refund” if they didn’t save people at least $2500. In fact they didn’t save anybody anything–they just took the $995. And of course, no refunds.
Robert Weed
The Federal Trade Commission is starting to really come down on these scams. Here’s a recent press release from the FTC. http://ftc.gov/opa/2013/01/innwealth.shtm