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Be wary of 'credit correction' companies

A couple who ran up about $100,000 on a dozen credit cards paid a Tehachapi firm $1,000 upfront but haven't seen any progress in half a year.

April 16, 2010|David Lazarus

Beverly Hills residents Andrea and Alan Rademan got hammered when the stock market collapsed in 2008, losing nearly all their retirement savings.

They subsequently ran up about $100,000 in debt on nearly a dozen credit cards after 72-year-old Alan Rademan, a psychiatrist, underwent back surgery and was unable to work for longer than he had expected.

"I know it was reckless, but I'd done it before," he told me. "I thought I'd be able to pay off the cards while they were still at zero-percent interest. I was wrong."

It was a bad move, but that's not the story here. The real story is what happened next, when the Rademans turned to a "credit correction" company that they say promised to reduce or even do away with much of their debt.

The company, DEC Credit Corrections of Tehachapi, Calif., is run by Donna Chavez. DEC's website says she started the business "after a bad experience with a credit repair agency who overcharged Donna for repairing her credit file."

The Rademans paid $1,000 in advance for Chavez's assistance, according to a copy of the contract provided by the couple. And then they waited for some word of progress.

And waited.

About half a year later, they say they're still waiting. Meanwhile, they remain buried in debt, struggling to pay their bills.

Chavez told me the Rademans have it all wrong. She said her office hasn't received any calls or e-mails from the couple for months and has been awaiting additional paperwork related to their finances before proceeding with the case.

"We provide a service to our clients," Chavez said. "We don't stiff anyone."

She also said she never told the Rademans that she could lower their debt. Rather, she said she could help improve their credit scores so they'd be in a better position to deal with lenders.

The Rademans dispute Chavez's account, but what becomes clear after reviewing their contract with DEC is that they don't have much to stand on.

The contract makes no promise for reducing debt and says that DEC offers "no guarantees regarding the amount of points credit scores will be raised," and that the company "is not responsible if clients' expectations are not reached."

"It was dumb to sign it," Rademan admitted. "Promises had been made verbally, but there was nothing in writing."

For what it's worth, the Better Business Bureaugives DEC Credit Corrections a grade of F. This is due in part to DEC's failure to respond to a customer's complaint and the bureau's own inquiries, and partly to what the bureau describes as "concerns with the industry in which this business operates."

Clearly the Rademans got in over their heads through a combination of mistakes and misfortune. In hindsight, they readily acknowledge that running up massive bills on multiple credit cards was a dangerous thing to do.

But consumer advocates and state officials say the Rademans made a bad situation worse by paying $1,000 upfront for a credit counseling service, with no real promise of action in return.

Frequently, they say, such services are little more than scams.

"It's a huge problem in California right now because of the economic circumstances," said Robyn Smith, a supervising deputy state attorney general. "Debt-settlement companies are a real minefield."

Ken McEldowney, executive director of Consumer Action, a San Francisco advocacy group, advised debt-laden consumers to seek out nonprofit credit counseling services that request little or no money upfront.

A good place to start is the National Foundation for Credit Counseling, which can help you find reputable resources in your area. You can either call (800) 388-2227 or click the "find a counselor" link on the foundation's website.

According to the organization's guidelines, "no fee should be assessed prior to the service being provided," and any "setup fee or monthly fee should be reasonable, usually defined as $50 or less."

Steer clear of any credit counselor who isn't affiliated with either the foundation or the Assn. of Independent Consumer Credit Counseling Agencies. (There's no indication on DEC's website that it has such an affiliation.)

Smith at the attorney general's office also encouraged anyone who feels misled by a credit-repair service to file complaints with the attorney general's office

and the Better Business Bureau.

"The more complaints we get about a particular business," she said, "the more likely that we'll do something about it."

I passed this along to the Rademans. They said they were eager to lodge a complaint or two.

That might be the first smart decision they've made in a while.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send tips or feedback to david.lazarus@

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