Promises to erase debt catch state's eye
Attorney General Charlie Crist's office is investigating a New Port Richey company amid more than 100 complaints.
By PHIL DAVIS
Published June 14, 2005
NEW PORT RICHEY - Florida Attorney General Charlie Crist said his office is "very aggressively" investigating a New Port Richey company that, for a fee, promises to use a legal loophole to eliminate tens of thousands of dollars in credit card debt.
"They are not in business anymore," Crist said Monday. "We have over 100 complaints with this company so we're being very aggressive on this investigation."
But as of Monday evening, New Leaf Associates' Web site still was promising that clients who paid a minimum fee of $3,795.95 could escape up to $50,000 in debt and "emerge from the process with enhanced credit scores, completely forgiven credit card or tuition based debt and a second chance at a sound financial future." The company promises debt relief within 120 days.
New Leaf president James Patterson remained upbeat about the future Monday.
"We're still in business," he said, noting he had voluntarily stopped accepting new clients while he worked with state investigators. "I understand things don't look good. But we're standing behind it. We just got painted with a bad brush because we are doing things a lot differently. We've been a victim of this whole situation as much as our clients."
When asked to explain how he could eliminate thousands of dollars in debt without paying credit card companies, Patterson said: "We do not contest the debt. We satisfy it. As far as how we go about that, that's a trade secret I can't disclose."
Patterson, 44, of 9805 Hermosillo Drive in New Port Richey, is no stranger to credit trouble. Federal court records show he filed for bankruptcy in 1999 and then for bankruptcy protection in 2001 and 2002. He said he paid his creditors in full in the latest cases.
Patterson also faces trouble in Pasco-Pinellas Circuit Court. Two lawsuits filed by residents in Citrus and Manatee counties accuse Patterson and New Leaf of breach of contract. Both clients say they are in worse financial shape than when they signed up with New Leaf.
Patterson said a hostile collection and banking industry caused the problems. According to the lawsuits, his company has also blamed the 2004 hurricanes, bad phone systems and inadequate computer systems and, in one case, said "accounts were frozen due to the Patriot act."
Patterson said he inadvertently started the rumors about running afoul of homeland security while complaining about a bank withholding funds. He said he meant it as a joke.
Crist called the New Leaf promise "a scam."
"That takes us back to a very old rule: If it sounds too good to be true, it probably is," Crist said. "You've got to pay the debt in full in order to do away with it."
Credit counselors agreed. It is possible for a debtor to negotiate a settlement that significantly cuts down on the debt, but not without wrecking their credit, said Paul Richard, executive director of the nonprofit Institute of Consumer Financial Education. He said the IRS also might see that debt reduction as income and demand extra taxes.
He advised consumers to steer clear of any company that promises to eliminate debt.
"It's all bogus in my opinion," Richard said. "There is no special or secret loophole in or out when it comes to getting credit card debt forgiven."
That's something Manatee County resident Vann Moore said he is learning the hard way.
In a lawsuit filed last week, Moore said New Leaf and its marketing arm, Quantum Business Consultants, took his $5,295.95 payment in September 2004 to pay off $63,148.69 in credit card debt, but failed to take any action.
"It's June 13," Moore said, "and I'm in the same spot I was in before, except all four accounts are now in the hands of collection agencies and I can't get a word out of New Leaf. I've been brought into court on two accounts, so now I'm accruing court costs on top of interest. I'm getting calls from collection agencies and letters from attorneys."
Citrus County resident Tina Brooks has a similar tale. In her lawsuit, filed in April, she accuses New Leaf, Quantum and Ameribiz Consulting of taking her $3,795.95 payment and failing to resolve her debts as promised. New Leaf did pay off half of her credit cards, but after almost a year in the program, she still owes $41,000.
"It's obvious this program doesn't work like it's been sold to all these people," she said. "Now I have ruined credit because of this."
Brooks also accused New Leaf of selling her personal credit information to marketing organizations.
Patterson filed a $75,000 settlement offer in Brooks' case in May, but told neither Brooks nor her attorneys. Brooks found it on Friday while checking her case file.
"He's made so many promises, I'm not holding my breath," Brooks said. "It's just a fluke that I went there on Friday and found it."