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State AG Goes After Debt Relief Companies

Posted February 16, 2008

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— A judge ordered two Florida debt-relief companies to temporarily stop operating in North Carolina after the state Attorney General argued they had defrauded North Carolinians out of more than $500,000.

North Carolina Attorney General Roy Cooper filed suit against Hess-Kennedy Chartered LLC, The Consumer Law Center and the companies' owners, Laura L. Hess and Edward Cherry, of Coral Springs, Fla. Cooper said the companies charged up-front fees but did nothing to relieve consumers' debts.

"Instead of helping people, these outfits usually drive people deeper into debt,” said Cooper.

Wake County Superior Court Judge Donald W. Stephens on Friday ordered the companies to stop offering its services to, taking payments from and entering contracts with North Carolinians.

“Now we’ve stopped them from taking money from North Carolina consumers, and we’ll work to stop them for good," Cooper said, adding that he intended to get a permanent ban and refunds for customers.

Hess-Kennedy and The Consumer Law Center claimed to be able to reduce people's debt by as much as 60 percent, Cooper said.

Customers paid up-front fees amounting to as much as 15 to 25 percent of their total debt. In return, the companies promised to negotiate a settlement with creditors, according to the lawsuit.

The companies, however, did not pay off customers' debts and continued to draft money from their banking accounts after customers canceled, the suit alleges. Some complainants were sued by their creditors after they stopped payments and both companies failed to the promised payments.

At least 220 North Carolinians paid more than $500,000 to the companies, and Cooper said he suspects there are more victims in the state.

“During this time of economic uncertainty, people are feeling pinched and looking for ways to save money and get out of debt,” said Cooper. “But steer clear of anyone who tells you to stop paying your bills and give them your money instead. For help getting a handle on your debts, turn to a reputable non-profit credit counselor.”

Hess and Cherry used online ads to drive consumers to referral agents, who got a cut of of the fees, according to the lawsuit. None of their employees were licensed to practice law in North Carolina, Cooper argued.

One agent, Consumer Credit Counseling of America, advertised itself as a non-profit credit counselor in Raleigh and Winston-Salem telephone books. Instead, callers talked to out-of-state telemarketers who pitched the defendants’ services.

Accredited debt counselors are available by calling the National Foundation for Credit Counseling at 1-800-388-2227.

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