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For Immediate Release

Media Contact:
Raquel Guillory, 410-576-6357
rguillory@oag.state.md.us

Attorney General Gansler Offers Advice to Marylanders Interested in Debt Settlement and Debt Management Companies

BALTIMORE, MD (March 26, 2009) - With a growing number of Marylanders turning to debt settlement and debt management companies for debt resolution, Attorney General Douglas F. Gansler is advising consumers to be aware of the risks and costs involved with the services offered by these companies. Debt management and debt settlement companies frequently charge consumers fees they can ill afford and do not always deliver the anticipated savings. In the latest issue of The Consumer’s Edge, Attorney General Gansler recommends that consumers consult with a reliable credit counseling agency, including agencies affiliated with the National Foundation for Credit Counseling, before signing contracts with debt management or debt settlement companies.

Debt management companies are required to be licensed by the Maryland Department of Labor, Licensing and Regulation’s Division of Financial Regulation. These companies seek concessions from creditors, and then collect monthly payments from consumers to pay the creditors and collect fees for their own services. Unlike debt management companies, debt settlement companies are not required to be licensed in Maryland nor distribute consumers’ payments to their creditors each month. Instead, debt settlement companies hold consumers’ payments in escrow accounts until enough money has been saved to negotiate a settlement of all debt. This process will not prevent creditors from making collection calls or suing consumers for payment.

“It is important for consumers to know the associated costs and risks before entering into any debt settlement or debt management agreement,” said Attorney General Gansler. “Consumers should be wary of any company that will not provide all the details of its plan before they are asked to sign a contract.”

As an alternative to entering into a debt management or settlement plan, Attorney General Gansler suggests that consumers first contact their creditors to try and settle their debts or negotiate a payment plan. Many credit card companies will work with consumers to resolve their debt situations. Consumers should also check with the Attorney General’s Consumer Protection Division and the Department of Labor, Licensing and Regulation to find out whether complaints have been lodged against the business.

If consumers have any questions about debt management or debt settlement companies, they should contact the Consumer Protection Division’s hotline at 410-528-8662 or online at www.oag.state.md.us. Additional information regarding credit counseling, debt management companies, and debt settlement companies can be found online in the latest edition of The Consumer’s Edge at http://www.oag.state.md.us/Consumer/134.pdf. The Office of the Attorney General distributes The Consumer’s Edge free to more than 800 businesses, agencies, schools and community associations. Groups interested in receiving a monthly issue should call 410-576-6956.

   

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