Target 5 Consumer Alert: Credit counseling cautions - WMC Action News 5 - Memphis, Tennessee

Target 5 Consumer Alert: Credit counseling cautions

Consumers be warned!

If you think turning to a credit counselor for help digging out of debt will solve all your problems -- THINK AGAIN!

It's something one Mid-Southerner wished he'd known months ago.

Facing a 30% pay-cut at his job, Gregory Haynes turned to Memphis-based Financial Counselors of America (FCA) to help consolidate his credit card bills.

Haynes says the company that was supposed to help him dig out of debt, sent him spiraling deeper into it.

"I feel basically we were lied to, taken advantage of, and basically just belittled," Haynes said.

When Hayes signed up with FCA, he had balances on 14 credit cards requiring a $1500 minimum monthly payment.

Haynes says FCA promised to work with his creditors to lower that payment, reduce his interest rates, and pay off all his debt within 60 months.

"It actually did the reverse." Haynes said. "If I were to just stayed making the minimum payments myself and not even went to them and stuff I would have been a lot farther ahead than I am now."

Instead of paying his creditors, Haynes paid FCA, which then cut checks to collectors.

Haynes says those checks came late, racking up late fees, finance charges, and sky-high interest rates on already sky-high bills.

When Action News Five called FCA about Haynes account, company officials turned down repeated requests for an on- camera interview.

In a written statement, FCA President Robert Hanusovsky

Said, "We have spent many hours on their file trying to resolve any issues they had. We are an honest company and try out best to help our clients."

It's help that comes at a price.

FCA charges clients like Haynes a 150 dollar initial set up fee for debt consolidation.

"If they're charging 100-200 dollars, that's 200 dollars that could go to your creditors," said Hack Hogan with Consumer Credit Counseling in Memphis. "That's 200 dollars you could pay to your debt. Why do you need to pay it to an agency?"

Hogan says five percent of his clients report being burned by debt consolidators and in the same boat as Haynes: deeper in debt.

Hogan says many more cases go unreported.

"Everything should be fully disclosed as far as how they're going to use your money, how they're going to assist you," Hogan said.

It's a lesson Gregory Haynes says he learned the hard way.

"We just wanted to make sure that we didn't get behind on anything."

Now Haynes is just hoping to get back to where he started.

Another issue: the $150 set-up fee FCA charges its clients.

The Tennessee Division of Consumer Affairs says it's possible FCA is breaking state law which caps that set-up fee at just $75.

Division officials say they aren't investigating since they haven't received any official complaints about FCA's fees.

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