By Kenneth Long on January 26, 2011

The Consumer Law Group is mounting a charge of its own against Florida's attorney general. Pam Bondi's office is expected to file a lawsuit against the Florida debt settlement company that threatens to potentially shut down the company.

Instead of rolling over, American Debt Negotiators is representing the Consumer Law Group in a separate lawsuit that challenges the AG's authority to investigate its business practices. American Debt Negotiators is a service provider for the Consumer Law Group.

Their lawsuit does not question the ability of the AG to enforce the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). Instead, they claim that "such investigation and the threatened law suit, however, exceed the attorney general's statutory authority, as the practice of law does not constitute 'trade or commerce' as such term is defined by FDUTPA."

Ironically, one could argue that they are not actually engaged in trade. While their customers pay big money for debt settlement services, rarely are the promised services actually delivered to the customers.

The lawsuit itself is likely only a delay. Yet, even a delay of a month or two could mean hundreds of thousands of dollars in extra fees collected from customers.

It will be interesting to see how CLG's attorneys expect to win an argument that they are not subject to the consumer protections guaranteed by FDUTPA. They claim that only the Florida Supreme Court has jurisdiction over the practice of law and lawyers. Of course, only lawyers can practice law, and if debt settlement services are conducted without direct supervision of legal counsel, then it would obviously be subject to oversight by the attorney general.

This is indeed an interesting case, and one that we expect the authorities to win! While we watch this case, we want to remind you to be vigilant to protect yourself from debt settlement scams and other schemes while you take steps to eliminate debt and eventually start building wealth.

By Kenneth Long on January 25, 2011

Occasionally I come across a scam that is so heartless and unconscionable that makes me wonder how anyone could sleep at night conducting such a scam. Sometimes I discover these scams by accident while others the scam is brought to my attention. Of course, I don't think that my analysis of the scam was the intent of the person that left a comment on our website.

On a recent article about the Auto Payment Solutions scam a comment was left by a reader which screamed self-promotion. Here is their comment:


Of course, I removed the link to their website since I don't want to be responsible for sending a vulnerable, gullible or desperate debtor to the wolves. Instead, I am hoping that this message finds you in time that you don't make a terrible mistake with your money.

Who Are They?

AutoPaymentAssistance.Com is an online marketing website owned by Variety Investment Corporation. I found that the corporation was registered as a Georgia corporation on July 20, 2010. I reviewed their Certificate of Incorporation (pdf) and found that this is a for-profit corporation. Here are the owners of the company:

• Salim F Hamlett; 3522 Blair Circle NE, # 207, Atlanta, GA  30319
• Hashim A Hamlett; 5132 Falconwood Court, Norcross, GA  30071

The registered agent was listed as Herbert H Hamlett with an address of 3522 Blair Circle NE, Suite 207, Atlanta, GA  30308. You may notice that the registered agent shares the last name and address of the first incorporator, of which it is legal in many states to serve as your own registered agent. The corporate address is 214 Ponce de Leon Ave NE, Suite 1, Atlanta, GA 30308.

What is the Service?

According to their website, their primary service is a membership program in which your fees provide you with protection in case you are unable to make your car payment. Their Silver Membership Plan requires a $19.95 monthly fee that is billed to a credit card each month. You must pay in for a minimum of 120 days before you may access the "benefit payment." You may access a maximum loan of $300 once per year which must be repaid within 90 days. You  must also pay a $39.95 processing fee to access your benefit payment. Assuming you collect the maximum benefit, you are basically paying $279.35 annually in fees on a $300 loan. That "NO interest" loan just cost you 263% APR.

The Platinum Membership Plan charges an upfront membership fee of $49.95 plus a $14.95 monthly fee. With this plan, you are able to access two "benefit payments" each year for a maximum of $500. While the wording makes it look like both loans may be for $500, it does state a maximum of $500. That limits each loan to $250. They do not require a processing fee to take out the loans. The platinum membership is also an interest prepayment plan for a short-term loan. You pay $229.35 in fees during the first year for up to $500 in short-term loans that must be prepaid within 120 days. Your platinum membership entitles you to a 135% APR or higher loan.

It should be noted that payday loans are illegal in a number of states. Variety Investment Corporation's home state of Georgia also prohibits these predatory loans. The website claims to offer "Nationwide Car Payment Assistance."

The worst part about this scheme is that 135% APR or 263% APR loans are the best case scenarios for these predatory loans. Any customer that borrows less than the full amount will still pay the maximum loan fees, meaning their APR will be even higher. Worst still, if you don't take out the loans, then you are still paying maximum loan fees, which calculates as an interest rate of Infinity APR.

Our Conclusion

The membership programs offered by Variety Investment Corporation through its AutoPaymentAssistance.Com website are among the worst products I have ever investigated. The company is marketing high-cost prepaid interest loans, and they are fooling desperate debtors into signing up for what they thought was payment protection insurance.

If you come across that company and are pondering what to do, do yourself a favor and avoid the scam altogether. The most likely scenario that will occur is that you will prepay interest on loans that you will never even be able to take out. The company is destined to be shut down by state regulators once enough of their victims file formal complaints about this dreadful scam.

By Kenneth Long on January 24, 2011

The Servicemembers Civil Relief Act (SCRA) has been in effect in multiple forms since 1940. It protects active duty military members from excessive interest rates on loans while they are protecting these capitalist freedoms. Despite federal protections, many service members have complained that they are being overcharged in violation of the law. Some have even lost homes to foreclosures that were illegally connducted.

Chase admits that it made errors in how it managed certain service members accounts. It believes it overcharged about 4,000 military families. To compensate them, the bank is mailing checks totalling roughly $2 million to those families to reimburse them for interest that accrued above and beyond the 6% rate that should have been charged.

In addition to those overcharges, Chase also admits that it foreclosed on the homes of 14 families in error. Of those 14, they have already made amends to 13 of the families. Chase released the following statement:

While Chase has come clean, there is new scrutiny on other major banks and mortgage lenders. Jack Reed, the Senator from Rhode Island has asked U.S. Attorney General Eric Holder to examine the banking and mortgage industries for additional violations of SCRA. Delaware Attorney General Beau Biden instructed banks to review their mortgage practices for adherence to SCRA.

Banks are definitely on notice about the potential for violations. Bank of America faced a lawsuit in 2009 in which class-action status was being sought regarding potential SCRA violations through the Countrywide division that had previously been acquired by the bank.

Active military members are protected from high interest rates, but they must notify the lender before they can expect to receive the rate reductions. SCRA protects against interest rates above 6% on mortgages, credit cards and even car loans. Service members should send a copy of their orders along with their request for a lower interest rate. The debt must have been incurred prior to their actually receiving orders for active duty, and active duty must last at least 180 days.

By Kenneth Long on January 24, 2011

Financial Future Network claimed that they could help clients negotiate massive reductions in their debt through settlements. According to the Federal Trade Commission, Financial Future Network had no idea what services would be provided since all client contacts were turned over to other so-called debt relief companies who bought sales leads.

The FTC ruled that Financial Future Network was nothing but a media tool. It was designed to generate leads which would then be sold to debt settlement companies.

While there is nothing wrong with generating sales leads and then selling them to other companies, it is illegal to make claims of service that not only cannot be substantiated, but in reality are rarely achieved for debt settlement clients. Advertisements claimed that consumers could pay thousands less than they owed.

It should be noted that Financial Future Network was already violating consumer protection laws prior to implementation of the revised Telemarketing Sales Rule that affected debt settlement providers. That rule will make it even more difficult for companies to make spurious claims of debt settlements when their results do not support their claims.

Financial Future Network is not alone in recent enforcement actions by the FTC. Similar action against 800 Credit Card Debt leaves two of the largest debt settlement advertisers out in the cold.

The actions by the FTC come at a time when already tens of thousands of clients have been ripped off by rogue debt settlement companies that took millions of dollars in upfront fees. Nothing can be done to fix the damage caused to previous clients. At least this action reduces the chances that a client struggling with debt will contact the wrong organization. Perhaps they will seek assistance instead through a reputable credit counseling organization.

The ban on debt settlement or any other debt relief service applies to Jonathan Greenberg, Financial Future Network LLC, Hermosa Group LLC and Media Innovations LLC. An $8.5 million settlement against the perpetrators has been reduced to just $500,000 as long as the defendants have truthfully demonstrated their financial position.

By Kenneth Long on January 17, 2011

Wells Fargo is one of many major U.S. banks that are responding to the changing regulatory environment by raising fees. Wells Fargo checking account fees are now starting at $5 a month for a service fee. While that monthly fee might be lower than the $6 to $12 faced by most other customers, there are substantial ATM fees when using another bank to access your account.

Despite the bad news to those who love free checking, there are ways to avoid checking account fees on your Wells Fargo account.

You can maintain an average daily balance of $1,500 on your checking account to avoid a monthly fee. Some banks require a minimum daily balance threshold to avoid the fee, so simply keeping an average of $1,500 should be easier.

If you are unable to maintain an average balance of $1,500 in checking, you still have an alternate option for avoiding the $5 monthly fee. You must have a direct deposit of at least $250 during the month to avoid incurring a monthly fee. Transfers or other deposits do not meet the definition of qualifying direct deposit. If you are not employed, you may still meet the requirement if your social security or pension payment is directly deposited into your account.

Other Fees

Wells Fargo does charge $2.50 for each withdrawal made at a non-Wells Fargo ATM, or $2.00 simply for a balance inquiry. A litany of fees ranging from a $3 debit card cash withdrawal through a teller to $100 for any legal process (levies, garnishments, subpoenas, etc.) provides a dizzying experience should you ever try to read through all of the additional fees that you could face.

Therefore, it is a good idea to play by the rules if you want to keep your Wells Fargo checking account fee-free. That is, keep an average account balance of $1,500 or make sure that you keep receiving direct deposits every month. If you get paid by paper check, then you are already taking numerous risks that could cause a lot more problems and expenses than a simple $5 monthly checking account fee!

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Related articles:
Wells Fargo and Chase Testing $3 Monthly Debit Card Fees [August 17, 2011]
Fed Fines Wells Fargo $85 Million for Falsifying Mortgage Docs [July 21, 2011]

Image courtesy of Velda Christensen.