Texans Get Refunds From "Debt Settlement" Company

by Mike Bevel CollectionIndustry.com

That Dallas company that you paid a lot of money to to help get you out of debt? Has to give you back your money. Because, turns out, nine times out of ten, it didn’t keep you out of debt necessarily.

Under an agreement with Texas Attorney General Greg Abbott, DebtXS, a Dallas firm that advertised services to help consumers get out of debt, will have to refund the fees customers paid back to them. Abbott says the fees for the company?s services were vague, confusing, and misleading.

“Consumer debt can grow to be a serious problem. Consumers who are working in good faith to pay off their obligations need to know their rights and should never be exploited by a third party who claims to bring them good tidings,” Abbott said in a statement. “Consumers should always remember there is no quick fix for debt or credit issues, and they should be wary of any company that suggests otherwise.”

DebtXS was…how to say this politely?…different, in its approach. DebtXS charged 15 percent of the total amount of the debt as its fee ? which means that to be a client of DebtXS, you had to have a debt load of at least $29,500 to be enticing. That 15 percent fee wasn?t paid up front, or all at once. Instead, automatic withdrawals ? withdrawals that many clients were not aware they had agreed to ? were deducted from their checking accounts.

DebtXS would also require their clients to place the money that should normally have gone to creditors into a personal savings account for several months or longer. DebtXS told clients that the money would be used to pay the creditor, and that it was all part of the arrangement DebtXS had made on behalf of the debtor. However, it appears that no such arrangement existed. With no money being paid to the creditors, creditors would step up debt-collection endeavors, sometimes even suing debtors for past-due debts.

After several months, DebtXS would contact creditors and offer to pay off the debt at a fraction of the total balance owed. If creditors agreed, DebtXS would contact indebted consumers, who would make the agreed-upon, lump-sum payments to creditors from the savings they had accumulated over time. If creditors did not agree to the offer, insisting late fees and interest were due, consumers would be immediately liable for the entire new balance.

The agreement with the attorney general allows for DebtXS to stay in business. However, The assurance of voluntary compliance DebtXS has signed will clearly describe all benefits, risks and costs of their debt settlement program in the future.