A Fate Worse Than Debt

Sometimes, as two North Philly consumers discovered, paying what you owe isn't nearly enough.

By Nick Powell
Add Comment Add Comment | Comments: 4 | Posted Jun. 29, 2010

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Brian Yard grew up in Towanda, a small blue-collar town in northern Pennsylvania, where, he says, people are scrupulous by nature and pay their debts as a general principle. Yard, 61, says he never imagined that this ingrained morality would be put to the test.

Early in 2008, Yard was suffocating in credit-card debt. His credit rating, once in good standing, had steadily plummeted. For Yard, filing for bankruptcy suddenly looked like a feasible option. But then a barrage of debt-settlement solicitors started calling him every day, voices with hollow promises of eliminating his mounting debt in less than three years. Yard says he had never heard of debt settlement before, so he ignored the calls.

Desperate to escape his financial woes, Yard finally picked up the phone one day in October 2008 and listened. Using powers of persuasion, a solicitor from Guardian Referral Network, a company “dedicated to helping individuals and families rid their lives of burdensome debt,” convinced Yard, a North Philly resident, to sign over his debt to a debt-settlement company. Willing to do almost anything to rid himself of the gnawing anxiety that had plagued him for months, Yard agreed. “When you’re between a rock and a hard place, you’re looking for a lifeline and you just kind of close your eyes and hope,” he says.

Acting as the middleman, Guardian Referral Network connected Yard with J. Hass Group, a debt- settlement company based in Arizona that, at the time, went by the name of JDH & Associates. A few days later, the company sent Yard a 20-page contract loaded with legal jargon and microscopic print.

At first, Yard put the documents aside, but the company persisted, calling him constantly and asking if he had signed yet. A month later, he signed the documents, which included a power of attorney that gave JDH the power to speak to Yard’s creditors on his behalf. “[The phone representative] told me the first thing they do is let all the creditors know [that he enrolled in a debt-settlement plan] and they send them the copy of a power of attorney,” Yard says. He adds that the company also told him to stop paying his credit card bills.

Two years later, Yard’s debt has grown by an additional $14,000 and he’s been sued by one of his creditors.

Yard joins a long list of debtors being victimized by the predatory, for-profit debt-settlement industry.

Debt-settlement companies promise to work with credit-card companies to write down debts—even when most creditors openly avoid working with them. As a result, some will advise consumers to discontinue their credit payments, so as to ease the settlement process when a debt is transferred to a debt buyer or collection agency, which are generally more apt to negotiate with settlement companies. Subsequently, consumers are then slapped with lawsuits from their creditors for months of missed payments. These debt-settlement companies, many of which operate without accreditation, then hit consumers like Yard with thousands of dollars in egregious fees and hidden charges.

“I feel stupid,” Yard says. “I was looking for a lifeline and [debt settlement companies] throw you an anchor.”

Before becoming a pawn of this multimillion dollar industry, Yard described himself as “a normal person who managed things.” He worked a series of odd jobs before settling in as an assistant general manager for Capital Auto Auction in Northeast Philadelphia. While at work, he says he suffered debilitating injuries to his back, wrist and neck after falling off of a platform. Yard was put on worker’s compensation and at that point, viewed retirement as a comfortable option. “I had a couple of retirement plans—I had done OK investing,” he says. “I had a SEP IRA and a traditional IRA, then I got a settlement from workman’s comp. I took the money from that and I invested it in stocks.”

Yard says he invested his settlement money in bank stocks since “everybody was making money” off of them. He figured that if he were ever in dire straits, he could sell the stocks and live off of what he had left. Then, in October 2008, when the banks started to crumble, Yard’s nightmare scenario became a harsh reality.

“At the time, every night you turn on the TV, Citibank is going bankrupt, Bank of America is going bankrupt, so I sold them [the stocks] for practically nothing.”

With 90 percent of his stocks wiped out and without any steady income, aside from the Social Security disability checks, Yard began running up tabs on seven different credit cards. He also began supporting his girlfriend, who moved in to his home with her three children. When her 17-year-old daughter got pregnant, Yard depleted one of his retirement accounts to help her out. By the time Yard signed on with JDH, he was $50,000 in debt.

Based on records provided by JDH & Associates/J. Hass Group, Yard began making monthly payments of $816.64 to the debt-settlement company, including a $39 maintenance fee. These fees were laid out in the contract.

The documents show that JDH withheld the first three payments as a fee for their services. Each subsequent payment was placed in a trust account that would be used for settlement payments to credit card companies. Over the next 15 months, the company received 48 percent of the payments, and it deposited the remainder into a bank account for settling debts via NoteWorld Servicing Center—a Bend, Ore.-based payment processing company that recently had its accreditation license yanked by the Better Business Bureau—which charged Yard a mysterious $200 management fee, the only fee not detailed in Yard’s contract with the debt-settlement company.

Months passed and Yard’s debt burden only seemed to weigh heavier. He called the debt-settlement company to complain, and the following day a representative called back: One of the creditors had agreed to a “time sensitive” settlement offer. They agreed to take $2,525 on a $5,500 bill. Yard gave the green light to settle.

Yard was not as successful with his other credit cards because he stopped making his credit-card payments. Subsequently, he was sued by one of his creditors.

The creditor demanded that Yard pay $14,313 on his original debt of $11,800. When he turned the lawsuit over to JDH’s legal department, they responded with a settlement offer of $9,546—81 percent of the original debt and 67 percent of what it ballooned to. Yard reluctantly said yes, reasoning that this was his largest debt. A week later, the settlement company informed Yard that the credit-card company had rejected the offer.

Growing increasingly weary with the arrangement in April, 2010, Yard called Kerry Smith, an attorney with Community Legal Services in Philadelphia. “There’s really some question here as to how much the debt settlement company is doing,” says Smith, who works with dozens of clients like Yard. “Mr. Yard is really unique in that he’s so dedicated to trying to make this work that he’s put in half of his income. He’s the rare consumer that actually accumulated money in a savings account and yet it doesn’t seem like [JDH] were doing anything until he called them.”

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COMMENTS

Comments 1 - 4 of 4
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1. Anonymous said... on Jul 7, 2010 at 02:19PM

“Awesome article. Some really good reporting.”

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2. Suspicious by Heritage said... on Jul 7, 2010 at 05:35PM

“I have no less than eight of these tempting, persuasive solicitations in a pile next to me. I am glad I investigated this murky practice and fortuitously uncovered the true face of these greedy felonious grifters. My question is: How, for the love of Ra, did these companies find out I have so much credit card debt in the first place? It was always my belief that credit information was confidential, yet these unethical scoundrels somehow acquired my information from somewhere. This latest scam and all the immoral economic outrages that have occurred lately bring to my mind a climactic episode of "The X-Files" from back in about '93 where the opening scene went by and the opening theme played; instead of the last few seconds of the opening theme having a black background with white letters stating the usual phrase: "The Truth is Out There", it had the same black background with the phrase: "Trust No One". I cannot remember the Latin phrase but I know its translation: "Buyer Beware".”

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3. Suspicious by Heritage said... on Jul 7, 2010 at 07:02PM

“Addendum to my comment of 7 Jul 10 @ 17:53. Of the 8 solicitations I mentioned, 5 had "return addresses" on them and three had websites. Curious, I typed in each "return address" (each from 5 different states) in a well-known, respected and trusted but unnamed search engine map service. In each case the "return address" came back as NSA: "No Such Animal" as my high school Algebra teacher used to say (God rest her soul). Of these given addresses, two were located near upscale commercial parks, one was located near two banks, another had a cornfield on one side of the road and a small shopping on the other and one was located in an industrial area filled with graffiti: yet in each case there were no physical structures to match the given "return address": most curious. I also checked the three websites and all three conveyed the same common theme: a remedy that would cure one's economic woes with images of happy, shiny families in the background whose lives are all smiles and sunshine.”

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4. Anonymous said... on Jul 20, 2010 at 10:08PM

“Mr Hass the CKO of the j. Hass Group stated in paragraph #5 on page #2 that their company does not tell customers to stop paying their creditors.

If you look on the J. Hass group website under Debtsettlement-The Program ,they state the strategy of their program in general is to stop paying on your debts long enough to force your creditors into being willing to settle for less.

Kinda sounds like maybe they do tell you to stop paying your creditors.”

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