Andrew Cuomo claims companies that offer to cut credit card debt are scammers

On Thursday New York Attorney General Andrew Cuomo issued subpoenas to 14 debt settlement companies and one law firm on the grounds of predatory practices. In a statement Cuomo noted that some companies falsely represent they can reduce a consumer's credit card debt by as much as 75% through negotiations, take their fees upfront, and then keep the fees even when services are not provided.

The companies that were subpoenaed include American Debt Foundation Inc., American Financial Service, Consumer Debt Solutions, Credit Answers, LLC, Debt Remedy Solutions LLC, Debt Settlement America, Debt Settlement USA, Debtmerica Relief, DMB Financial LLC, Freedom Debt Relief, New Era Debt Solutions, New Horizons Debt Relief Inc., Preferred Financial Services Inc., U.S. Financial Management Inc., and the Allegro Law Firm of Huntington, N.Y.

“These companies prey on people who are doing the right thing by seeking to manage their debt and get control of their finances,” Mr. Cuomo said on Thursday through an aide. “With all of the problems we face in this time of economic distress, it is outrageous that these firms are targeting those who are the most financially vulnerable.”

Robby H. Birnbaum, a lawyer who represents settlement companies and is on the board of an industry trade group, said Mr. Cuomo was engaging in “a P.R. stunt.” 

“The press release was issued before any of these companies even received subpoenas, so we have nothing to respond to,” Mr. Birnbaum said.

Several of the companies said they would welcome an investigation of the industry as well as tougher regulations.

“The only companies that will suffer are those that don’t offer genuine value,” said Jeff Takle, a spokesman for DMB Financial in Beverly, Mass. Robert Linderman, general counsel for Freedom Debt Relief in San Mateo, Calif., echoed those remarks. “We’re delighted the attorney general is seeking information from the industry,” he said.