EXTRA: Beware of bad debt businesses

TAMPA, Florida - It's a situation most families face at one point or another: trying to find the best way to pay off debt.

Unfortunately, for more and more Americans, their choices are proving to be counter-productive as more and more rip-off schemes are popping up to take advantage of the desperation.

The Florida Attorney General and Florida Bar Association both say they've had their hands full recently with debt-settlement companies advertising their services in Florida and charging customers crazy fees for negotiating down their debt - or in some situations - not even contacting a customers' creditors.

"Whether through credit repair, debt management, debt settlement, or interest rate reduction schemes," said Attorney General Bill McCollum, "it is unacceptable to deceptively convince consumers facing financial distress to part with their money."

The Attorney General's office has filed suit against five different debt-settlement companies in recent years, while its Economic Crimes division took action against multiple others. One firm they investigated was the Law Office of Jason D. Hass, an Arizona-based attorney who solicited clients in Florida for debt-settlement services.

"It was definitely a nightmare," said a Tampa Bay woman, wishing to remain unidentified, speaking of her dealings with Hass.

She says after Hass agreed to work down her debt, she began paying him $330/mo. However, after six months, she says Hass hadn't even contacted her creditors and was pocketing the money. Her late charges continued to pile up and her credit continued to drop.

"I paid them for six months," said the victim, "before I realized I could have paid off three of my credit cards with the money I had sent them."

She got her $1,500 back from the Attorney General while Hass was put on probation with the State Bar of Arizona for an unrelated ethics violation.

"When you're in that situation, you'll believe just about anything anyone tells you," said Tampa-based lawyer Patrick Vincent, who says he has been recruited by companies looking to make a quick buck in Florida. "Debt-settlement companies (are trying) to get $7,000 to $9,000 per customer. And that's a lot of money. And that could pay off a lot of debt."

"Ten years ago, there were day traders. Five years ago, there were mortgage brokers. Day traders became mortgage brokers. Mortgage brokers are now becoming debt-settlement guys. It's a progression of where the money is," said Vincent of opportunistic businessmen.

He also said most people in debt - and there are a lot - can do the work themselves that companies are advertising.

"Your best bet is to get on the phone and call these folks," he said of creditors. "Ask them, 'Is there anything we can do TODAY to make sure I can pay back in the long-term?'"

Vincent says many credit card companies will negotiate to eliminate some - or all - of the late payments and interest owed on an account if you make arrangements to pay back the principal. And if negotiating with the company doesn't work, he suggests contacting a real non-profit credit counseling service.

He also suggests calling the Attorney General or Florida Bar for tips on how to find a trusted debt-settlement defense attorney.

Credit specialist Laurie Zoock also offered some red flags to look out for if you are considering help with your debt:

• Companies that guarantee a percentage reduction of your debt (it's illegal and impractical since every person's situation is different);

• Advertisers that talk about a "new government program" (there isn't really a new government program to help you with your debt);

• Companies that require large up-front payments (if they have your money, they don't necessarily need to follow-through with services);

• Companies that want your checking account number immediately (your credit card is safer);

• Companies based out-of-state (you may not have as much legal protection outside Florida).

Zoock also says if you're a victim of a bad business, it's important to fight back. Writing countless letters can pay off, as the above victim from Tampa Bay found out. She wrote letters (and saved copies of each) to more than a half-dozen agencies, having luck with the Florida Attorney General's office.

"Persistence pays off," said the victim, who may not get "true" justice according to Zoock. She got her money back, but she now owes more to her creditors and her credit plummeted.

The one piece of advice the victim, Zoock, and Vincent all gave: vet any company you choose on the internet. Bad businesses often have bad reputation on message boards and you can research them using any search engine.

ADDITIONAL LINKS:
- Florida State Attorney General - Its Economic Crimes division can help you fight bad business practices.
- Florida Bar - Supervises all attorneys in Florida.
- RipoffReport.com - Where a lot of bad businesses get reported by victims.
- Better Business Bureau - A clearinghouse for business complaints.

You can follow 10 Connects reporter Noah Pransky on Twitter at www.twitter.com/noahpransky or Facebook at www.facebook.com/noahpransky.