RALEIGH (July 31, 2020) – Late yesterday in the House Financial Services Committee, Congresswomen Alma Adams (N.C. 12th Congressional District) asked Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger to take greater steps to protect America and its military community against the predatory practices of debt settlement companies.
“In this time of COVID, with an economy that’s hurting, it’s very likely that our constituents will find themselves saddled with more debt, so I want to know what you and the CFPB will do to protect American consumers and our military from being misled by false promises and high-pressure sales tactics from the for-profit debt settlement industry because they are really leaning hard on these folks, “ Adams said. Director Kraninger responded, “I agree with you it is a concerning area…” Watch Congresswomen Adams’ questions and Director Kraninger’s responses in full.
Congresswomen Adams also referenced letters from the USMC – Camp Lejeune, US Army – Fort Bragg, and the President of NC State Employees Credit Union, all expressing concerns regarding debt settlement practices.
Consumer advocates and other entities in North Carolina have complained to policymakers regarding the predatory practices of the debt settlement industry. “Some debt settlement companies’ real goal in offering debt settlement services is to steer consumer/borrowers into high-cost debt consolidation loans, thereby capturing millions of dollars in credit card debt that they then package as bonds for Wall Street investors,” said Alfred Ripley, Director of the North Carolina Justice Center’s Consumer, Housing & Energy Project. “In recent years,” Ripley explained, “we have seen a disturbing increase in N.C. of debt settlement company activity, and with hundreds of thousands of N.C. workers losing jobs, we anticipate a damaging surge of debt settlement company abuses that can be avoided by updating N.C.’s debt settlement law.”
Congresswomen Adams’ questions to Director Kraninger were asked while the debt settlement industry, backed by powerful and influential lobbyists* is trying to block legislation in North Carolina to stop debt settlement abuses. The North Carolina Justice Center and its allies worked to support HB 1067 Modernize Debt Settlement Prohibition to help protect borrowers from abusive debt settlement practices by closing two loopholes in North Carolina Law. Senate leaders refused to bring the bill to the floor of the Senate despite it having passed the House and the Senate Finance, Judiciary, and Rules Committees unopposed.
This statement from a victim of a debt settlement company was taken from a recent complaint:
“I have paid the debt settlement company, over the last year, $12,464.40 for debt settlement of eight accounts…I am now faced with two court-filed judgments against me and one motion to file judgment…Now not only do I have credit card debt to settle, I also have judgments that can lead to liens against my property AND there will be court costs that I will be responsible to pay. What started out, to me, as a solution to help consolidate my debt has turned into a scam to take as much money from me as possible with no results in diminishing my debt.” China Grove, NC
This legislation is supported by:
The USMC – Camp Lejeune The US Army – Fort Bragg
NC State Employees Credit Union The Carolinas Credit Union League
The NC Bankers Association AARP North Carolina
The NC State Bar The Resident Lenders of North Carolina
The NC Attorney General The NC Justice Center
The NC Financial Services Association The Center for Responsible Lending
The NC Attorney General’s Office reports that since 2010 it has been involved in enforcement actions against debt settlement companies involving 7,755 victims and over $14 million in illegally charged fees.
The CFPB and FDIC have brought enforcement actions against debt settlement companies and related entities such as Freedom Debt Relief as recently as 2018, and the NY Attorney General Letitia James recently issued a statement involving an action against Freedom Debt Relief.
“Today’s settlement will deliver more than $3.5 million directly into the pockets of struggling consumers, many of whom continue to suffer the devastating economic impacts of COVID-19,” said Attorney General James. “Ten years after this company paid over $1.2 million to my office for its fraudulent and deceptive practices, Freedom Debt Relief is back in hot water for unlawful behavior once again. Today’s settlement will ensure additional restrictions are placed on Freedom Debt Relief so that the company can no longer take advantage of consumers.”
Debt Settlement Practices are illegal or heavily regulated in 18 states including South Carolina and Georgia. North Carolina’s laws prohibiting debt adjustment were first passed in 1963 and modernized in 2005.
*These Lobbyists Were Retained by Debt Settlement Companies its associations or Companies That provide Services to Debt Settlement Companies.
John Hardin: American Fair Credit Council of Fort Lauderdale Florida, Registered January 8, 2020
William Morgan: American Fair Credit Council of Fort Lauderdale Florida, Registered January 8, 2020
May 12, 2020 HB 1067 Modernize Debt Settlement Prohibition filed.
Ches McDowell: Freedom Debt Relief of San Mateo, California, Registered May 14, 2020
Nelson Freeman: Freedom Debt Relief of San Mateo, California, Registered May 14, 2020
Bill Scoggin: Beyond Finance of Houston Texas, Registered May 15, 2020
Daniel Baum: Beyond Finance of Houston Texas, Registered May 15, 2020
Lindsey Dowling: Beyond Finance of Houston Texas, Registered May 15, 2020
Joe Lanier: Beyond Finance of Houston Texas, Registered May 15, 2020
Thomas Moore: Clear One Advantage of Baltimore Maryland, Registered June 11, 2020
Scott Laster: Global Holdings, of Tulsa, OK, Registered June 12, 2020
Betsy McCorkle: Global Holdings, of Tulsa, OK, Registered June 12, 2020