Debt Settlement Company Fined for Violating State Law
Debt settlement companies are supposed to offer consumers a way to save money in dealing with debt problems. However, that is not always the case. Learn more about a national debt settlement company that was fined for violating state law.

September 27, 2011 /24-7PressRelease/ -- Debt Settlement Company Fined for Violating State Law

The name "Legal Helpers" should inspire confidence that a legal problem would be addressed in a professional manner. However, that is the opposite of what a Chicago-based debt settlement company offered clients with debt problems. According to a Chicago Tribune report, the Illinois Department of Financial and Debt Regulation (IDFDR) levied a $314,000 fine against the company for providing debt relief services through an attorney who was not licensed to practice law in the state of Illinois.

In issuing a cease-and-desist order, the IDFDR that the company did not "provide legal representation to consumer or otherwise act in an attorney capacity." Further the Department learned that the firm charged nonrefundable fees that included a $500 retainer, a $50 monthly charge, and 15 percent of the total debt. The Illinois Attorney General filed a lawsuit against the firm (also known as Macey, Aleman, Hyslip & Searns) for violating the Debt Settlement Consumer Protection Act. The Act forbids debt settlement companies from charging up-front fees to negotiate with creditors, and allows such entities to collect fees only after a consumer's debt is settled.

The Legal Helpers matter exemplifies the need to be cautious about debt settlement companies that seek compensation before performing services. Prepayment requirements could be the sign of a debt settlement scam. Consumers should also be aware of the following when seeking help with debts:

-Not being provided with full details about the debt settlement process. Companies that only assert that they will get the job done, or settle your debts, may only be telling consumers what they want to hear simply to get their money.

-Being deceptive about savings. A company may also charge a service fee, while only paying creditors significantly less than what can be paid to settle a debt. When this happens, the consumer doesn't actually save money.

-Companies that ask consumers to open savings (or checking) accounts in lieu of making debt payments, so that money that would have been paid to creditors could be saved and eventually paid in one lump sum. Unscrupulous companies usually draw their fees from these accounts before paying off debts. Therefore consumers end up paying more than they would have compared to paying creditors directly.

Consumers can also check out the company's status with the local Better Business Bureau. If it has a clean record of successfully reducing debt, chances are it can effectively deliver on its promises. Also discuss the company with an experienced debt relief attorney who can explain the pros and cons of using a debt settlement firm.

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