September 18, 2006
The State of West Virginia has reached a settlement with an Arizona-based credit counseling agency it accused of unlawfully charging state residents. Attorney General Darrell McGraw said the settlement with Debt Free will result in $300,000 in refunds to more than 1,000 consumers.
McGraw announced the settlement with Help Ministries Incorporated, which does business as Debt Free, a credit counseling agency based in Mesa, Arizona. Debt Free's primary service consisted of arranging monthly payment plans known as "debt management plans" to assist consumers facing dire financial circumstances.
West Virginia law caps the allowable fee for administering debt management plans at 7% of the monthly payment amount. However, McGraw said Debt Free previously charged monthly service fees in excess of 7% as well as a one-time "set-up" fee that was not distributed to creditors.
Debt Free also charged several other fees not permitted by West Virginia law, including a monthly fee for funds handling, a fee for "credit education," and an administrative fee of $20.00 for failed electronic debits.
McGraw's settlement with Debt Free marks the third such settlement that McGraw's office has reached with credit counseling companies in the last twelve months.
McGraw's office previously entered into settlements with Debt Management Credit Counseling Corp., of Boca Raton, Florida, and Cambridge Counseling Credit Corp. of Agawam, Massachusetts.
