New York's debt-settlement probe underlines pitfalls for consumers

New York Attorney General Andrew Cuomo's announced investigation into debt settlement companies underscores the challenge and heartache suffered by consumers seeking to reduce their debt through such companies to get back on solid footing. In issuing subpoenas to 14 debt- settlement companies and one law firm, the attorney general's office alleges that the debt-settlement plans offered by these companies were "often inherently flawed." Some companies, the AG's office states, "falsely represent that they can reduce consumers' credit card debt by as much as 75 percent through negotiations with creditors. In addition, the companies often take their fees up front and keep their fees even when they do not provide the promised services." 

Consumer Reports recently examined the same industry and arrived at some equally disturbing findings. Click here for our report, and for advice on getting out of the debt trap. (The Cuomo press release includes advice for consumers, as well.)