SC credit counseling law nets largest refund from out-of-state firm

Calling it a great win for South Carolina consumers, South Carolina Department of Consumer Affairs Administrator Brandolyn Pinkston announced that a California-based company has voluntarily agreed to give full refunds to 363 South Carolina customers because it failed to conduct business under the provisions of the South Carolina Consumer Credit Act. In total, Freedom Financial Management, Incorporated of California agreed to refund $839,000 to the South Carolina customers it overcharged for credit counseling services.
The settlement reached on February 18 marks the single largest recovery from an out-of-state agency since the Credit Counseling Law went into effect on December 1, 2005. SCDCA staff attorney Carri Lybarker says the company also failed to obtain a license to operate in the state of South Carolina. Lybarker says the investigation of the company started with a phone call to Consumer Affairs from a customer who complained that the company did not provide the services she had contracted for.
“We contacted the business to ask for their side of the story, as well as to see how long they’ve been doing business and with how many consumers. We responded back and forth and the department put forth that because they did not have a license (to operate in South Carolina) we believed that refunds were in order in lieu of us bringing an action or seeking fines and the company agreed to such a resolution.”
Since the Credit Counseling Law went into effect in 2005, SCDCA has recovered more than $2,500,000 in credit counseling refunds for consumers in the state.
Lybarker says the law explicitly spells out what is expected of consumer counseling services that choose to operate in South Carolina. “This law applies to people that provide credit counseling which includes debt consolidation, debt management, credit repair, debt negotiation, debt settlement for closure assistance, basically credit relief. Also the law caps the fees that these organizations can charge consumers, permits consumers to cancel the contract, requires the organization to prove a one-on-one education session with the consumer to go over managing household finances.”
Lybarker says the South Carolina Consumer Affairs regularly corresponds with consumer affairs agencies in other states to help police the marketplace to protect consumers from companies seeking to take advantage of their customers.
Lybarker says in these tough economic times more and more people are seeking credit counseling and that has lead to more activity from companies seeking to take advantage of consumers. “Most certainly since we’ve hit this recession, the amounts of persons in default on their credit cards is at a 20 year high. That means you have a  bunch of people seeking assistance with getting rid of that debt, paying that debt, so most certainly we are seeing more consumers seeking assistance with this financial hardship which also comes into play, business attempting to scam consumers that are in this vulnerable state.”
Lybarker says before contracting with a debt consolidation or credit counseling firm, consumers in the state should contact the South Carolina Department of Consumer Affairs first.