Darrell McGraw
CHARLESTON - State Attorney General Darrell McGraw reached a settlement agreement with a Massachusetts credit counseling company that was charging more interest than allowed by West Virginia law.
The two sides agreed on a $250,000 settlement that will be spread among approximately 1,596 state consumers who contracted the services of Cambridge Credit Counseling Corp.
"We didn't file a lawsuit," said Assistant Attorney General Norman Googel, of the Consumer Protection/Antitrust Division. "We merely opened an investigation. We just reached a resolution without having to file a lawsuit."
In addition to the $250,000 payment, Cambridge agreed to pay an extra $10,000 that will be "placed in trust and used at the discretion of the Attorney General solely for consumer protection purposes, including but not limited to restitution, consumer education, credit or bankruptcy counseling and education, conflict resolution programs and costs associated with implementing restitution orders," the Assurance of Discontinuance says.
Cambridge attempts to help individuals make debt-management plans with their creditors and, according to its website, "is dedicated to educating consumers on the importance of sound financial management and to providing financially distressed individuals and families with the appropriate education, financial management tools and budgeting skills necessary for them to become more financially responsible consumers."
Cambridge, though, was charging an up-front fee not used to pay off the debt and a monthly service fee of 10 percent. West Virginia does not allow such up-front fees and caps monthly payments at 7 percent.
That led to the investigation by McGraw, who still maintains that Cambridge is one of the "good guys in an industry that is coming under increasing scrutiny by state and federal regulatory agencies."
Googel says Cambridge was very cooperative, and he feels the company's violations may have occurred because it was operating accidentally under the laws of its home state, not the laws of the states of its clients.
Googel adds that several other states are investigating Cambridge.
"They were very cooperative and had already reformed their practices on their own," Googel said.
The Attorney General's office looked at Cambridge's records, which date back to 1996, to see who is entitled to a refund. Consumers who never filed complaints or were even aware of what happened may soon be entitled to a check.
"In this type of case where consumers are overcharged, we request records of all the consumers and our goal is to make full restitution of all excess fees," Googel said. "That's not always possible, but that's what our goal is."
In his press release, McGraw said, despite his feelings about Cambridge, that the debt-relief industry is treacherous and plans to "continue its vigilance" to make sure state consumers aren't taken advantage of.
"These are people who are already stretching their money to pay their debt," Googel said. "They want to keep their accounts current and keep from going default on their debts.
"If a company takes the money and doesn't pay it or pays it late, that's a problem. They end up being worse off than before they contacted the company."