For-profit counsel on credit debated


March 07, 2007|By Laura Smitherman | Laura Smitherman,Sun reporter

A House of Delegates panel considered yesterday legislation that would allow for-profit companies to provide credit counseling in the state, opening up an industry tarnished by AmeriDebt Inc., a Maryland nonprofit accused of bilking debt-strapped consumers of millions of dollars.

Consumer advocates say the legislation could allow for-profit companies that have been accused of gouging consumers with deceptive sales practices to set up shop in the state. Many of the nonprofit entities that have been investigated by state and federal regulators and by the Internal Revenue Service are affiliated with for-profit companies.

"We do not believe it would benefit consumers to allow for-profit companies to provide these services," said Steve Sakamoto-Wengel, an assistant attorney general in the Consumer Protection Division. "They need an objective person looking at their finances."

Credit counseling grew as an industry in the 1990s with the prevalence of credit-card debt. The firms help consumers establish a payment plan by analyzing their financial position and negotiating with credit-card companies. Under a federal bankruptcy law passed two years ago, anyone who files for protection must first visit a credit-counseling agency.

AmeriDebt once was one of the largest credit-counseling firms. The Federal Trade Commission sued the Germantown firm four years ago, and its founder, Andris Pukke, settled the case last year, without admitting any wrongdoing, by agreeing to turn over as much $35 million to be disbursed to hundreds of thousands of consumers. AmeriDebt was affiliated with for-profit companies DebtWorks Inc. and the Ballenger Group.

Mike Croxson, president of Columbia-based Freedom Point, a for-profit company that provides financial advice and coaching, testified that his company should be allowed to provide credit-counseling services. His firm is an affiliate of entities under Ascend One Corp. that were criticized in a U.S. Senate investigation two years ago for excessive fees and inadequate counseling.

Maryland regulators are split on the legislation, which has failed to pass in previous General Assembly sessions. While the attorney general's office opposes the measure, which was introduced by Del. Brian J. Feldman, a Montgomery County Democrat, the Department of Labor, Licensing and Regulation's Division of Financial Regulation supports it.

Charles W. Turnbaugh, financial regulation commissioner, said Maryland has one of the nation's most robust regulatory frameworks dealing with credit counseling and that the fees charged are restricted. He also said his office surveyed other states that allow nonprofit and for-profit firms to provide debt management services and found that for-profits were not more likely to draw complaints.

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