When Bad Debt Advice Hides Behind Good Advice

I just saw a Houston Texas TV story about Heather Sullivan, an elderly 70 years old woman involved with a nonprofit debt management company, Money Management International. She paid $63,000 over the last five years with their help to get out of debt. While this may sound all fine and good on the surface, I cringed at the underlying message this report sent.

Nonprofit debt management companies offer a valuable service to many. However, their practices towards most seniors remind me of Han Christian Anderson’s fable, “The Emperors New Clothes.”

You probably remember the story. Swindlers posing as weavers offered to supply the Emperor with magnificent new clothes invisible to the stupid and incompetent. The Emperor hired them. Officials and the Emperor himself visited them at the loom. They saw nothing being made but pretended otherwise to avoid being seen as fools.

When the “new clothes” were finished, the swindlers “dressed” the Emperor. Naked, he set off on a procession through town. The townsfolk, not wanting to appear stupid, oohed and awed over the Emperor’s beautiful “new clothes.” Groupthink is very powerful. Finally, a little boy blurted out the truth, “Look! The Emperor has no clothes!” Unfortunately, most nonprofit debt management companies are like the swindlers who made the non-existent clothes when it comes to many seniors.

I am the Executive Director of HELPS, a national charitable nonprofit law firm that helps lower-income and poor seniors in all fifty states. Most seniors don’t understand that federal law protects their social security, pensions, disability, and VA benefits from debt collectors. This money is protected for seniors’ needs. It cannot be taken or garnished.

Nonprofit debt management companies advertise free services or a minimal monthly fee to help people in debt. But what they don’t disclose is that they have a prearranged agreement with the credit card companies and other lenders on whose behalf they collect. They keep a certain percentage of the amount they collect, usually 15-20%, as a “donation” to their nonprofit entity. This is how they are supported financially. Unfortunately, their financial interest, the donations they receive when seniors enroll in their program conflict with their duty to advise a senior that their income is protected.

Recently I spoke with Mary, a 74-year-old widow whose only income was $1,700 monthly Social Security. After $700 in rent, a $200 car payment, and a $300 debt management company payment, she was left in utter poverty. Yet when she enrolled in debt management, she was never told this simple fact, “Federal law protects your income; you don’t need to pay this debt.”

Most debt management companies withhold information about the protected nature of seniors’ income so that uninformed seniors will enroll in their services.

Like the groupthink among the townspeople in the fable, many respectable organizations like the AARP, even government agencies, regularly refer seniors to nonprofit debt management companies like Money Management International, perhaps thinking a nonprofit cannot harm.

However, withholding essential facts from a senior making a financial decision is fraud, plain and simple. HELPS believes that their fraudulent and deceptive practices need to be disclosed like the little boy in the fable.

Lower-income and poor seniors, some of the most vulnerable in our society, deserve to be given complete and accurate information regarding their protected income.

HELPS is a national 501 c nonprofit law firm. We represent seniors and disabled persons in all fifty states under the Fair Debt Collection Practices Act to stop unwanted collector contact. We also educate seniors and disabled persons on how to maintain their financial independence. Learn more about HELPS at www.helpsishere.org or call us toll-free at 855 HELPS-US. We turn no person away that needs the help we provide.