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Other nonprofits in credit-counseling industry under federal, state scrutiny

Friday, Dec. 1, 2006

AmeriDebt was by no means alone in its excesses, industry observers say.

Other nonprofit credit counseling agencies have been targeted by state and federal officials, including Cambridge Credit Counseling Corp. The Agawam, Mass., agency settled a lawsuit filed by state officials last year that charged it with misleading and overcharging consumers and moving millions of dollars to for-profit companies owned by the nonprofit’s top officers.

Cambridge continues to operate but has cut ties with the top officers and their particular for-profit companies, while setting up a $2.2 million restitution fund for clients, officials said. The agency funneled an average of $14 million to for-profit debt management companies in 2003 and 2004, and that declined to $2.9 million in 2005, according to federal tax returns.

From 2002 to 2004, Andris Pukke’s for-profit companies siphoned off an average of $26 million annually from AmeriDebt.

‘‘AmeriDebt was extreme,” said Deanne Loonin, staff attorney with the National Consumer Law Center in Boston. ‘‘But a number of nonprofit organizations had their own for-profit companies. Whether they benefited as lavishly as [Pukke] is another question.”

With the Internal Revenue Service, Federal Trade Commission and other agencies keeping a closer eye on such companies in recent years, the credit-counseling industry has made improvements, Loonin said. But there is still a ways to go, she said.

‘‘We need more affordable plans for consumers,” Loonin said.

The federal government maintains a list of ‘‘approved” credit counseling services, and industry groups such as the National Foundation for Credit Counseling provide lists of members that meet certain standards.

One agency on both lists is Consumer Credit Counseling Service of Maryland and Delaware, a Baltimore agency that has been around since the 1960s, according to its Web site. Officials there could not be reached for comment.

Last year, that agency had revenue of $6.4 million and, unlike AmeriDebt’s model, none of that went to a for-profit processing company, according to its federal tax return. Some $2.7 million went to salaries, and $734,000 was for advertising.

As for the root cause of AmeriDebt’s fall, some blame greed.

‘‘When profit motive is injected into a nonprofit industry, it should come as no surprise that harm to the consumers will follow,” Sen. Norman Coleman (R-Minn.) said in 2004.

Pukke and other former AmeriDebt officials have said the for-profit companies were established on the recommendation of studies that concluded that the industry would better serve customers and streamline operations if it outsourced back-office functions such as credit processing to for-profit companies.

But the level of extravagance and excess displayed by Pukke makes it hard to believe his claims that he wanted to help people, Loonin said.

‘‘It’s greed, basically,” she said.

Since settling lawsuits filed by the FTC and others earlier this year, Pukke has been involved in several other businesses, including a development company that is marketing property in Belize and an Internet gambling venture, according to the receiver’s reports. While Pukke is forbidden from working in the credit counseling industry, John Williams, his attorney, said there is nothing in the order prohibiting Pukke from pursuing other businesses.

That leads to more questions, such as what the 30-something Pukke will turn to next.

‘‘We hurt him,” said David J. Vendler, an attorney who filed a class-action lawsuit against Pukke in 2004. ‘‘But I don’t think he plans to just sit around and twiddle his thumbs for the rest of his life.”