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Debt-counseling firms ring up telemarketing gripes
16:58 15Jun2004
By Andy Sullivan
WASHINGTON (Reuters) - Charitable debt-counseling agencies rank among the most zealous telemarketers, according to government data obtained by Reuters, but their nonprofit status makes them exempt from new rules designed to crack down on unwanted calls.
Credit Foundation of America, an Irvine, California, debt-consolidation company, has drawn at least 10,872 complaints from consumers who placed their numbers on the Federal Trade Commission's Do Not Call registry -- twice the 4,991 complaints lodged against AT&T Corp., the No. 2 company on the list.
Another debt-counseling group, Debt Management Foundation
Services, drew more complaints than large phone companies like MCI
The FTC has recently sued two debt-counseling charities for fraudulent business practices, and one consumer advocate said questionable operations have become commonplace in the field.
The summary of telemarketing complaints through April 15 was provided to Reuters through a Freedom of Information Act request. FTC officials cautioned that many of the complaints could prove to be baseless because they have not been verified.
Unlike AT&T and other for-profit companies, charitable organizations do not face fines if they cold-call the 60 million phone numbers on the no-call registry, which took effect last October. Charities must honor consumer requests not to be called back, however.
Credit Foundation of America has registered as a 501(c)(3) charity with the Internal Revenue Service, according to Guidestar, a directory of nonprofit organizations.
The company has complied voluntarily with U.S. and state no-call registries since early April, an official said.
"I would imagine that new complaints are down to very negligible levels at this point," said Jerry Morris, a director and secretary/treasurer at the company.
Debt Management Foundation Services was not immediately available for comment.
NEGATIVE RECOMMENDATION
One consumer advocate said Credit Foundation of America rang alarm bells.
"Based on what I've seen, I'm immediately suspicious that they might be a phony nonprofit," said Travis Plunkett, legislative director at the Consumer Federation of America, citing the company's relatively high fees, aggressive marketing tactics, and emphasis on repayment rather than counseling.
"This is an example of exactly the kind of credit-counseling outfit we urge consumers to avoid," he said.
The Better Business Bureau has given Credit Foundation of America a negative recommendation based on consumer complaints. Consumers told the Better Business Bureau that the organization has deducted money from their bank accounts without permission and does not pay creditors in a timely fashion.
The company also charges $39 a month for its services, more than is allowed under California law, the BBB said.
Morris declined to describe the company's business practices in detail.
The FTC took action last month against another debt-consolidation company that drew telemarketing complaints.
A U.S. judge temporarily shut down the National Consumer Council in May after the FTC accused it of masquerading as a nonprofit so it could call numbers on the Do Not Call list.
Consumers filed 516 telemarketing complaints about NCC. An FTC spokeswoman declined to say whether Credit Foundation of America is under investigation.
Another FTC official noted that along with the NCC lawsuit the FTC recently sued another debt-counseling company, AmeriDebt, for fraudulent business practices.
"It's an obviously an that area we care enormously about," said FTC Assistant Director Lois Greisman. "You're dealing with consumers who are struggling to improve their financial condition and making (their condition) worse is fraudulent and illegal."
(c) Reuters 2004. All rights reserved.