May 5, 2009
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News: SDS West Sued by IL.
Illinois Attorney General, Lisa Madigan, filed a lawsuit against a debt settlement firm for deceptive marketing practices to lure consumers in and then charged them excessive fees to do little or nothing to help them. The lawsuit alleges that SDS West Corporation, of Aliso Viejo, California and its partner Nationwide Support Services told consumers they could reduce their credit card debt by 50% and be debt free in 12 to 36 months. Unbeknown to the consumer, SDS West only markets Nationwide’s debt settlement services while Nationwide conducts the settlement negotiations with the lender. SDS West boasts that their services are superior to credit counseling and bankruptcy. They promise consumers that they will contact their credit card companies and negotiate a significant reduction of the credit card balances. It is estimated that hundreds of consumers from Illinois alone have contracted with SDS for the program within the last two years.
Upon entering the program, SDS told consumers to stop making payments on their credit cards. Consumers were instructed to send the payments to SDS who would deposit them into an account for future negotiations. The firm claimed doing so would provide Nationwide greater leverage in negotiating with the credit card company. SDS charges a fee of 15% of the consumer’s total debt. The first payments are applied to the fee. Additionally, consumers are charged $50 a month for maintenance. In actuality, Ms. Madigan says consumers don’t realize that debt settlement firms do not begin any negotiations until their excessive fees are paid. Therefore, it takes several months to begin all the while the company continues charging maintenance fees.
The debt settlement firms aren’t the only ones racking up big fees. The customer’s credit card companies are also hitting the consumer with their own penalties and fees. The delay in payment often brings about legal action against the consumer placing him/her in an even graver situation. In the end, the consumer ends up in worse shape than when they began. The Attorney General advises consumers to only work with credit counseling agencies that charge modest fees and provide “true financial and budget counseling.”