Note: Ameridebt is now shut down. But read the story of the mighty fall from grace anyway, it's pretty entertaining.
Debt Consolidation Companies
Is this a good way to get out of debt? Nope!
One of the ways out of debt these days seems to be debt consolidation companies, and these guys seem to be popping up everywhere. How do they work and how reputable are they? That's the question that came to mind when I received the following letter:
| I need to know how reputable and honest a company called AmeriDebt is. I got on a program with them and have been in trouble with my creditors
because of a 30 day delay in negotiations ever since.
I'm not sure what, if anything they are doing for me. It's hard to
contact the people at their end, and they rarely return calls. What I'm
getting now is calls from creditors because my first month payment went
to a place called Infinity Resources instead of to the creditors. The
2nd payment went to AmeriDebt.
To shorten the story, I'm concerned that I enlisted the wrong people to
handle this. Maybe it's too early in the process, but it's not too
early to be concerned when things don't seem to be going in the right
direction.
|
I have heard of Ameridebt before, they seem to be a big player in the debt consolidation field. I did a brief internet search and came up with the following information:
Ameridebt's web site: http://www.ameridebt.org
April 10, 2008 Note: It's funny - their website now goes to a bunch of links to other debt management companies, probably affliliate programs. You can make a literal fortune from getting referral fees from these companies - but probably not as much as ripping people off on your own. They even state on the site they are not involved with Ameridebt. I wonder what they paid for the domain name.;)
Ameridebt claims to be non-profit as their
domain name suggests (the ".org" designation typically
means non-profit.) I called AmeriDebt, and got a live person after two rings. I introduced myself to the customer service rep and told her that I had received a letter from a reader complaining about them. I informed them I was about to post a scam notice on CreditInfoCenter regarding a complaint I had received from a reader and asked them if they had any comments. The service rep said the manager was gone for the day and I told them I was posting the scam notice that night, so this was their only chance to respond.
The manager called me back within 10 minutes, from her private residence. Here are the notes from my conversation with her.
When a customer signs up with
Ameridebt, they enter into a negotiation period. During
this period, Ameridebt makes deals with all the client's creditors to reduce the outstanding amounts and/or payments. Typical negotiation time is 3-5 weeks. She pointed out that during this period creditors still call, as they are not receiving any money. I read my reader's
letter aloud to her and she correctly concluded that my reader was enrolled in the loan program. The loan program assigns a loan referral company to monitor payments, and distribute money to the creditors.
Ameridebt either offers loans or arranges for a third party debt consolidation loan for their client if they can successfully make 6 on-time payments to this loan referral company. This loan is not cheap, ranging from between 12-15 percent. However, this is cheaper than most credit cards.
I reminded her that my reader had now made two loan payments to this loan referral company and none of his creditors had seen a dime of that money. Ameridebt said that yes, the first payment is not dispersed to creditors, it goes to cover loan fees, pulling credit reports, setting up your account, monitoring your credit reports. The remainder of money goes to closing cost of the debt consolidation loan.
I asked her why my reader's second
payment had not been received by any of his creditors. The
manager said Ameridebt pays a clients creditors promptly,
sometimes express mailing out the payments. She admitted,
however, they've recently opened up an investigation to find out
why some creditors are not posting payments immediately.
She said most creditors are currently overwhelmed with customers
on some kind of debt consolidation program and the collection
departments are completely understaffed.
The manager was very nice, cordial and
also made some comments about the type of customers they dealt
with (how impatient they were, or other words to that effect.)
I thanked her for returning the call and sent a copy of my notes
back to the reader.
Here's where it gets really interesting. I received this email back from my reader:
|
I want to tell you what happened. I never gave
you my counselor's name, but whoever you talked to got to him, and he got to me. I
knew he wasn't happy when he called on the home line and left me a
message that indicated he wasn't pleased. I didn't call him back, but a
few minutes later he called on my business number and gave me hell.
He said he didn't appreciate me stabbing him in the back, or going
behind his back. He said he has other clients to deal with and he had
received my messages but didn't call back because he was busy, and
because he didn't have the answers to my question's at the time. (He
could have spent 30 seconds and called back to tell me this instead of
ignoring the messages.)
He went on to tell me he's the best in the business and has 13 years of
collection related experience...if I wanted to get out of this debt
problem he was the man, but I shouldn't undermine what he's doing by
going to someone else. (All I did was ask some questions I needed
answered.) He asked me if I really wanted his help. Sort of an
ultimatum...if I said no he drops me like a rock, so I said yes because
if they are really going to help I don't want to start over someplace
else, not to mention the fact I'm now behind on all the creditors I
listed on the program. I also didn't want to lose the $1,268.00 I've
already sent them. |
And yet another VERY INTERESTING thing occurred.
I received a call from Ameridebt's PR person stating that they wanted to advertise on this site the next day. I didn't return the calls for several days, and this PR person left me a message each day (pretty rare), something I found to be both amusing and disturbing. Finally, I called them back and gave them our rates (posted on this site.) The PR person apparently had gotten a directive from someone high up that this was a site they definitely (emphasis mine) wanted to advertise on.
There are a couple of things I find disturbing about this whole episode:
- Was the inquiry to advertise a subtle bribe or did they review this website after I pointed it out and and come to the conclusion it was a good place to advertise? The cynic in me says no. But I've been wrong before.
- It bothers me that Ameridebt is collecting extra cash from the desperate debt-strapped masses to "cover operating costs". Isn't this just a little exploitive?
- Ameridebt's "counselors" are former collection agents? In my experience, these people are trained to be as nasty and threatening as possible to collect money from people who may not have it. Is it necessary for a non-profit organization to be so rude to their clients? After all, from the website, they imply a help-your-neighbor-in-need kind of atmosphere. From their site they state: In a national climate of rising debt, we can provide both
advice and solutions to consumers who are struggling with their creditors. Maybe it works when these former collectors play hard ball with the creditors. Yeah, maybe.
- Ameridebt seems to operate under the same principals are any other Consumer Credit Counseling Service organization, yet most CCCS organizations provide the same service of negotiating with creditors as Ameridebt without charging a fee. Yes, they provide loans that maybe some people need to get out of debt, but getting a 12% loan to payoff an 18% loan - does this make sense - how does that work?
- Like any other CCCS organization, going through Ameridebt will ruin your credit. They don't say this directly:
Do you have a good credit history? If yes, then you should be aware that your credit report may state that you are working through AmeriDebt. We can't guarantee how
future creditors will interpret this information, but we believe that it shows you are trying
to get help. Your credit report probably states that you've been carrying balances, made
late payments in the past 7 years, or even missed payments, so it may not be as
perfect a credit history as you think.
If no, then AmeriDebt can only help you. If you make your payments in full and on
time to AmeriDebt, then many of your creditors will "re-age" your account, which means
they will show your accounts as current after several payments. In general, if you are
paying off debt, that can revitalize your credit report. Showing that you are working
through a credit counseling service may show future creditors that you needed help but
wanted to pay off your debts in full.
See what they are saying: "your credit is probably already screwed up, so don't worry if we screw it up even more." For more information about why your credit gets ruined after going through CCCS (or apparently these guys), read this article.
My opinion? Stay away from these guys unless you have no other choice save filing a bankruptcy. And before you try an organization like this, contact your local CCCS agency to see what they can do for you first.
Update 5/5/99 - This little tale gets more amazing as time goes on. I received a phone call today from a lawyer representing Ameridebt. Mr. Lawyer got the formalities out of the way immediately by stating his name and the fact that he represented Ameridebt.
He said, in a very business-like and pleasant tone, that Ameridebt was upset over this very article and asked what could be done to get it removed. Very open-ended like that. I wondered to myself, How many zeros they would be willing to put on a check?!?! I replied instead that the article stated the facts to the best of my ability and I did not in any way stretch the truth or misrepresent what the Ameridebt manager or my reader had told me, so I wasn't willing to change anything about the article. He wasn't happy either with my opinion that the offer of advertising might have been a bribe, and I had to bring up first amendment rights: anyone can publish his or her opinion as long as it is stated as such. As a defense he said that no one at Ameridebt had heard back from me about their requests for advertising information. I told him I had responded via email.
Mr. Lawyer then told me he was disturbed by the fact that I had other debt consolidation companies advertising on my site, wasn't that a little unethical? I pointed to the disclaimer at the top of this article and also said I had not received any complaints about the companies advertising on my site, only Ameridebt. He wanted to hammer on this point to me and I told him again of my reasoning and that I wasn't going to change this website's information.
I offered to publish any rebuttal letter that they wished to send to us and post it unedited on this site. He then told me that the reader who originally complained to me was now very happy with the service, and asked me if my opinion would change if I received a letter from my reader stating this. I told him to have my reader send me a follow up email and we would be happy to publish it.
The Ameridebt attorney disputed the fact that Ameridebt requires the first loan payment to go into their own coffers and says this is a donation only. That's not how the Ameridebt manager I talked to put it to me and I told him that.
We were about 15 minutes into the conversation, and Mr. Lawyer really wanted to continue on, and go over the article point by point for dispute, but I was getting tired of the subtle harassment and intimidation tactics. To shorten the conversation, I told him that these points would best be covered in the rebuttal letter. I also warned him that I would be updating this article to include his phone call to me. He was flustered somewhat about this, demanding to know what I would say about it. I told him what I was thinking about covering in the amendment, and he was unsatisfied with my proposed summation of the conversation (basically what you see here). So I graciously offered to publish his version of the phone call as well.
About 5 minutes after this phone call ended, he called me back and wanted to know if I would accept advertising from Ameridebt if he could get me in touch with the right people. When I declined, he said "Well, at least you have some ethics."
I am waiting for the rebuttal letter with great eagerness. I have to tell you that this little episode has made me wonder about the ethics of these people. Ugh. And these guys are non-profit? I guess all you have to avoid making a profit is pay high salaries to your staff and owners and have big legal expenses.
Update 5/24/99 - I have received some interesting feedback from other readers who also have had unpleasant experiences with AmeriDebt. If you have had negative or positive experiences with debt consolidation companies, not just AmeriDebt, please let us know. We are especially interested in the debt consolidation companies who advertise on this site.
Update 6/25/99 - Ameridebt responds!
Here is the complete unedited text of the rebuttal.
Update 8/11/99 - Ameridebt and its finance company goes under investigation by the FTC!
Update 9/01/01 - More letters from our readers about Ameridebt
Update 5/01/00 - Epinions.com's rating of Ameridebt. What's even more interesting is the Better Business Bureau's posting on Ameridebt.
Update 10/29/01 - Business Week's article on Debt consolidation companies. Ameridebt is mentioned prominently, and I, Kristy Welsh, even gets a quote.
Update 1/3/02 - Newsweek's article on Debt consolidation companies. Ameridebt is mentioned prominently, and creditinfocenter.com even gets a plug.
Update 11/19/03 Finally, someone is taking these guys to task.
The FTC is suing Ameridebt!!
http://www.ftc.gov/opa/2003/11/ameridebt.htm. I've just set up a page giving advice for people who need to get out of these programs. There are lots of updates on the class-action lawsuits and investigations against these crooks.
Update March, 2005 The FTC is shutting down Ameridebt!! http://www.ftc.gov/opa/2005/03/ameridebt.htm
FTC v. AMERIDEBT, INC., No. PJM 03-3317 (D. Md.)
Parties: AmeriDebt, Inc.
DebtWorks, Inc.
Andris Pukke
Pamela Pukke, a/k/a Pamela Shuster, relief defendant
Assigned Attorneys: Jeanne-Marie S. Burke (BCP/FP)
Maiysha R. Branch
Alleged Conduct: Deceptive practices in violation of Section 5 and the Gramm-Leach-Bliley Act in connection with the offering of credit counseling services.
Status: Complaint for injunctive and other equitable relief filed 11/19/03. |
The Federal Trade Commission (FTC) has filed a class action lawsuit against these people. In addition, the state attorney generals of Illinois and Missouri have also filed class action lawsuits.
Ameridebt and other "non-profit" credit counseling agencies are also the target of investigation by the IRS, as reported by the New York Times.
Want some hints on settling/negotiating debts down on your own? Here's a good place to start.
Do you have a question you feel we haven't answered?
For a small fee, you can talk to a counselor on the phone or Buy the Book!
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