By Art Holliday
St. Louis (KSDK) - Beware of companies that promise to significantly cut your bills by negotiating lower payoff amounts from creditors. That's the warning from the Better Business Bureau, which gives an 'F' rating to a Chicago-based company called Legal Helpers Debt Resolution, which operates all over the nation.
"I should have known better," said 64-year old Sue Lewis. "Even my son told me, 'Mom, you usually catch onto things quicker than this.'"
Lewis was more than $20,000 in credit card debt when she contacted Legal Helpers Debt Resolution. She believed Legal Helpers would negotiate a more favorable interest rate from creditors and lower her monthly payments.
"And all I had to do was sign papers to allow them to take money out of my checking account," said Lewis.
Lewis made several monthly payments for more than $1,200. She started getting phone calls from her credit card companies wanting to know why she wasn't paying her bills. It appeared Legal Helpers had never contacted the creditors. She called Legal Helpers to get answers.
"Every time I'd call, I either got a voice mail, or that person wasn't there," Lewis said. "They're supposed to be my advocate, but they never called me back."
Lewis may have to file for bankruptcy, but she's hopeful she might get some of her money back because of a lawsuit by the Illinois attorney general against Legal Helpers Debt Resolution.
"According to Lisa Madigan's office, I should just wait, because they're going to trail with them."
Illinois Attorney General Lisa Madigan filed suit against Legal Helpers in 2011 in a case that has yet to go to court. Madigan alleges that Legal Helpers attorneys take up front fees from clients, then outsources debt settlement services to non-lawyers in third party debt settlement companies.
The Debt Settlement Consumer Protection Act forbids debt settlement companies from charging up-front fees, but attorneys are exempted from the law, if the attorneys provide the debt settlement service. Madigan says non-lawyers are doing the work, contracted by Legal Helpers. Jason Searns, General Counsel for Legal Helpers, said his company has done nothing wrong.
"We fully disagree with the contention of the attorney general," said Searns. "It is handled fully by the law firm in the name of the law firm and supervised by the attorneys as any law firm would that uses non-attorney staff personnel."
Ron Kondracki regrets his Legal Helpers experience.
"They've made it ten times worse than when I actually started with them," he said.
The uninsured driver who collided head-on with Kondracki's truck in 2010 left Kondracki unable to work for three months and $100,000 in debt. Despite Legal Helpers agreement to negotiate with his creditors, Kondracki says the company was more interested in collecting its fees than helping him fix his money problems.
Kondracki paid $28,000 to Legal Helpers over a 23 month period. He says he later learned $21,900 of that amount went to retainer fees, administration fees, and processing fees for Legal Helpers.
Consumer advocate Steve Rhode, the blogger who runs the website www.GetOutOfDebt.org, says that is a common complaint by consumers about debt settlement companies.
"The problem is, your initial payments are all going toward paying fees and not paying your creditors," said Rhode, "and in the meantime your debt is building up, your creditors are more likely to sue you, and if you can't settle your debt quickly, it's not going to end well."
Rhode says many of the things a debt settlement company does like negotiating more favorable terms from credit card companies, a person can do himself. But not everyone feels competent to attempt that, so Rhode suggests three questions that consumers should ask before signing up.
"What is your refund policy? May I speak to the attorney who's going to handle my case? If I'm sued, is the attorney going to come to court and represent me?"
Debt analyst Anisa Sharif of Personal Credit Solution in Ballwin, Missouri is now working with Ron Kondracki to solve his money issues. Her company collects its fee after a client's debts are settled.
"Do not pay any fees up front," said Sharif. "Don't even pay a cent for the counseling session, let alone the program fees. You have to see results before you ever pay a cent and that's one way that you'll protect yourself from ever being harmed."
The Chicago Better Business Bureau has issued a consumer alert about Legal Helpers and gives the company a rating of 'F' because of the number of consumer complaints. Ron Kondracki says he's fed up with Legal Helpers.
"I've probably talked to twelve different people over the last two years with different extension, different names," said Kondracki. "The constant runaround, and I'm the one fighting the problem and they're the one taking the money."
"I'm not diminishing the concerns of these clients," said Legal Helpers General Counsel Jason Searns. "I would like to know more about what happened here. But I can tell you that of the thirty-thousand clients nationwide, a small percentage of them have expressed these concerns."
That's little consolation if you're the client who's complaining.
"They promised me the world," said Ron Kondracki, "and delivered absolutely nothing. Absolutely nothing."
"I feel angry, stupid, aggravated," said Sue Lewis, "to think I let somebody dupe me like that."