In October, 2003, Ameridebt, one of the nation's leading credit counseling services layed off all of its workers and is no longer accepting new customers. Why? Because of complaints made by many customers and the fact that both the Illinois and Missouri Attorney Generals have filed suit against Ameridebt for fraudulent practices. In particular, Ameridebt was accused of defrauding its customers by charging millions in hidden fees and not forwarding payments on to creditors as agreed. In November, 2003, the Federal Trade Commission filed suit against Ameridebt and has launched an investigation to determine what regulations and laws are needed to better regulate credit counseling services so that companies like Ameridebt won't be able to cheat consumers in the future.
Cambridge Credit Counseling and about 50 other credit counseling services, are currently being investigated or have been sued by the Federal Trade Commission and several states for dishonest practices (March, 2004). The FTC and IRS are currently conducting a joint investigation of credit counseling services to determine if they are operating as non-profit consumer-friendly organizations or are just scam organizations out to rip off the public (March 2004).
The IRS is auditing all credit counseling agencies who claim non-profit status. As of May 2005, they had revoked the non-profit status of 30 percent of all credit counseling agencies they audited because they discovered that these companies were not the charitable organizations they were claiming to be, but rather, fronts for for-profit companies who were doing a poor job of providing debt management and credit counseling services to debtors. The IRS audits are uncovering the sad fact that most of the debt counselors at these agencies have absolutely no training and are completely unqualified to dispense budgeting advice to anyone.
Unfortunately, despite the IRS audits, too many credit counseling services are only interested in getting as much money as they can from consumers and have no real interest in helping them resolve their debt problems, regardless of what their advertising claims and it's very hard for the average consumer to know which services are honest and which are not. Before signing up for credit counseling services read the contract thoroughly and learn more about credit counseling beforehand by reading the articles below.
