Credit Solutions Of America - Credit Counseling Dallas

Credit Solutions of America is a privately owned debt settlement company based in Dallas, Texas. It says it has more than 750 employees and has served more than 250,000 customers. Established in 2003 by Doug Van Arsdale, the firm says it is the largest of its kind. Credit Solutions' management include: Doug Van Arsdale, CEO; Jon Sisson, President; Mona Cayard, CFO; and, Heather Carmichael, Director of Operations. Credit Solutions is the subject of several pending lawsuits nationwide.

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Background

Debt settlement companies negotiate with creditors to accept reduced payments. Credit Solutions of America says that it has settled more than $900 million of debt since its inception in 2003, and says that the average settlement is 50 cents on the dollar. However, the New York Attorney General Andrew Cuomo disagrees, and in his state's lawsuit against the company has said Credit Solutions settles debts for only 1 percent of its customers in that state.

The Better Business Bureau reports that Credit Solutions has an "F" rating, the lowest rating given, and that as of June 19, 2010 it has received 1477 complaints against the company in the preceding 36 months. According to the report,

Of these 1477 complaints, the company has resolved 1152 complaints, 319 had been "administratively closed," meaning they could not be settled, and 6 were unresolved. Of the 1152 reported as resolved, the customer acknowledged acceptance of 519 resolutions and failed to acknowledge acceptance of 633.

Credit Solutions charges a flat 15 percent fee on a client's total debt. So, if a consumer has $10,000 in total debts, Credit Solutions will collect a $1500 fee upfront. This 15 percent fee is not disclosed on the firm's website, but has been disclosed by a New York state lawsuit against the company.

In 2007, the company was recognized by JD Powers and Associates, a marketing information services firm, for excellence in satisfying its call center customers. Credit Solutions has also been certified as ISO 9000:2008 from BSI, which is a result of ongoing company wide audits by an independent third party to ensure quality management systems.

The company has a community service group called "Credit Solutions Cares," through which employees volunteer with Dallas/Fort Worth area nonprofit organizations and help them to raise donations.

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Controversy

Credit Solutions has settled cases with the states of Oregon and Idaho. It remains the subject of lawsuits by the Attorneys General of six other U.S. states.

Settled legal cases

As a result of Oregon consumers' complaints about Credit Solutions' high upfront fees, in May 2010, the Attorney General of Oregon ruled that the company was banned from doing business in that state for three years. As part of the decision, Credit Solutions was required to give $2600 in restitution to four Oregon residents, and some of the company's 800 other Oregon customers may be refunded the firm's fees if they are dissatisfied with the services. Credit Solutions provided no comment on the settlement.

In May 2007, the Idaho Department of Finance, the state's financial regulator, found that Credit Solutions was providing "debt settlement" services to state residents without the required license for credit counseling. As a result, the Department of Finance settled with the company, and Credit Solutions was required to return $588,000 in fees it had collected from Idaho residents, and pay $3000 in attorney fees and investigative expenses. Today, Credit Solutions is not a licensed credit counselor in Idaho, and cannot be because Idaho requires credit counseling companies to be 501c3 nonprofit organizations.

Current lawsuits

In October 2009, Florida's Attorney General filed suit against the company alleging that "Credit Solutions of America unlawfully charges significant advance fees before completing or, in many instances, commencing performance of its debt settlement services. The Attorney General has received over 140 complaints about the company, but estimates that it has thousands of Florida victims."In response, Credit Solutions said, "This lawsuit is a political gambit that fails to recognize the value that...Credit Solutions of America Inc., provides to Florida residents."

In September 2009, Illinois Attorney General Lisa Madigan filed suit against Credit Solutions alleging that "the company falsely claims that its services can help to reduce consumers' credit card debt by 50 percent." . The firm responded that "these charges are outrageous and baseless."

In November 2009, the Maine Attorney General filed suit against the company and its president Douglas Van Arsdale. The suit alleges that the firm "violated the law by using deceptive and unfair practices in marketing debt settlement services, and for failing to register as a debt management service." The suit seeks to recover fees paid by Maine consumers to the company, plus civil penalties and costs.

In June 2009, the Missouri Attorney General sued Credit Solutions saying it "did little or nothing to solve" customers' debt problems. Credit Solutions representatives did not provide comment.

In May 2009, New York Attorney General Andrew Cuomo filed suit against Credit Solutions for "fraudulent business practices and false advertising." The lawsuit alleges that "18,000 New Yorkers signed up as the company's customers between January 2003 and September 2008. The firm promised a 60% reduction in its consumers' outstanding debt, but an average of 1% received that savings. The company declined to comment at the time the suit was filed.

In the company's home state in March 2009, Texas Attorney General Greg Abbott has filed suit against the company for "conducting an illegal scheme that defrauded Texans with financial problems." The suit says that the firm not only charged its customers for services that were not delivered, but that since its debt settlement program forces customers to stop making payments to their creditors, many customers could face unexpected late fees, interest, more collection attempts, and even lawsuits by their creditors. The Attorney General has received more than 140 complaints against the firm in the past two years.

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Lobbying

In 2009, the company spent $282,500 to lobby Congress and attain legislation favorable to the firm.

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Media coverage

In July 2009, the ABC News Nightline program did an investigative story on Credit Solutions. In the piece, the reporter interviewed Heather Carmichael, the company's director of operations. Carmichael was asked about the three separate state attorneys general (now five) that were suing Credit Solutions, and responded. "I wish there was an easy answer to that question. The industry is changing so rapidly. And there is more change to come." She declined to comment further on the pending litigation except to say, "I can tell you that we are working diligently with them toward an acceptable solution." Nightline asked her what percent of the firm's clients pay their fees without having their debt settled by Credit Solutions. She responded, "That's a great question. I don't have that number, but I can certainly look at it for you." Carmichael has not provided that information to ABC News. New York Attorney General Cuomo said Credit Solutions settles debts for only 1 percent of its customers in that state. Credit Solutions posted a rebuttal to the ABC report on its website.

A March 2010, CBS Early Show story on the debt settlement industry criticized Credit Solutions of America's business practices, and provided consumer advice for debt settlement counseling.

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