I can give you a further example that where you have a dozen creditors some of them may be what I would term reasonable creditors who will attempt to go along with an individual, but we find that so many of the creditors believe that the old conflict between the salesman and the credit department has been won by the salesman. He will sell them and will collect. They are heavy-handed in their collection procedures and will not allow the debtor in many cases to cut his payment one bit. They will tell him if he cuts the payment and there is a garnishment proceeding, they will institute it. When they see we have set up an account to deal with all the creditors fairly and not favor any creditor and to make regular payments on this account, they will deal with us. Mr. JACOBS. Thank you very much for your testimony. Mr. SISK. You mentioned that you have 56 offices. Do you mean nation-wide? Mr. HOLLAND. Yes, sir. Mr. SISK. In how many states do you operate? Mr. HOLLAND. At the present time we are in eight states and the District of Columbia. Mr. SISK. How many offices do you have in Washington, D.C.? Mr. HOLLAND. One office in the District. Mr. SISK. All of your activities for the District are carried on through one office? Mr. HOLLAND. Yes, sir. We have four offices in Maryland, but one office in the District itself. Mr. SISK. Where are those offices located in Maryland? Mr. HOLLAND. We have one in Hagerstown, one in Elkton, one in Mt. Rainier and the other is in the Marlow Heights Subdivision. Mr. SISK. You operate under what name of in the District? Mr. HOLLAND. In the District, Credit Advisors. Mr. SISK. Approximately how many clients do you have in the District of Columbia at the present time? Mr. HOLLAND. At the present time just over 900 clients. Mr. SISK. Is this a fair average? I realize when you complete one client you pick up new clients. What is your annual average? Mr. HOLLAND. In the District it would have been closer to 1200 clients. That would be a fair average over the last two years. When we started up, of course Mr. SISK. I was going to ask, how long have you been operating in the District? Mr. HOLLAND. Since June of 1962. Mr. SISK. How many other credit adjustment companies, or consolidation companies are operating in the District? Mr. HOLLAND. Mr. Chairman, I looked in the yellow pages last night because at last check there were five others, but I believe two of them have closed their offices due to the recent publicity, or at least during the last three or four months. Mr. SISK. You are familiar with the many criticisms and have commented this morning on some of the statements that have been made before this committee. I presume you were here for the opening statement yesterday morning on this subject and I am sure you are generally familiar with other statements and publicity, particularly given to such agencies existing in the District. DEBT ADJUSTING BUSINESS I understand in answer to Mr. Jacobs your defense primarily goes to your company, I assume, and its practices; is that right? Mr. HOLLAND. Yes, sir. Mr. SISK. Do you have any comment to make on the fact that there are and have been abuses here in the District? Mr. HOLLAND. I certainly do. Mr. Chairman, my feeling is and my experience has been that in the states where debt management is regulated, states like Michigan, your own home State of California, Illinois, Iowa, Connecticut, Washington State, that the abuses have disappeared because the licensing acts have required certain financial information to be submitted on all officers, that a certain financial responsibility be shown, a certain experience in the industry, certain bonding requirements, licensing requirements, audit by the agency at the cost of the licensee, and other items that have caused the industry to become one that is respected in these states. It operates without the abuses. Michigan prior to the licensing act had abuses. At the same time, as I stated earlier, that the Federal Congress was having hearings in 1958, there were abuses in Michigan. They began to work on a bill. There was an outlawing bill proposed and there was a licensing bill proposed. In Michigan they took the standpoint it would be harsh to outlaw business before giving it a chance to function under licensing. They licensed the business in Michigan and quite a few of the operators who are in the business prior to licensing did not apply for licensing. Now there are not any abuses in Michigan. The same is true in California, as Mr. Rabinowitch testified yesterday. My feeling is that any abuse in any industry should be eliminated, not just debt management but any industry. I feel that the Congress here every day legislates businesses and controls businesses far more complex than debt management. I feel that once a licensing bill is passed here that those abuses will completely and totally disappear. Mr. SISK. You operate in California? Mr. HOLLAND. No, we do not. Mr. SISK. You do not have any offices in California? Mr. SISK. Do you operated any so-called mail operations? Mr. SISK. Do you have any direct mail operations of any kind? Mr. HOLLAND. We do on occasion send mail solicitation out. The local office here might send out a mail item to a client but we will never do it. For instance, it was mentioned yesterday there are outfits that had nothing but a mail-drop operation. This is not the case with us. We have had certain people that might have called in to our office and requested help at one time and in discussing their affairs. with them we find that we really can't help them. We can give them some advice and they can handle their affairs themselves. This does happen in quite a substantial number of cases. We follow that up in a month with a letter which I term a solicitation because it is a solicitation. "If you are having difficulty and we can help you, come and see us." A mail operation such as was described, no. Mr. SISK. Since you mentioned that and due to some comments yesterday, do you make any charge initially for a prospective client who comes in and you spend an hour or two with him? Mr. HOLLAND. Unless we are able to in our interview determine that the client can be helped by our services, and unless we are able to sign the client and have him become instead of a prospective client an actual client, there is no charge. There is no interview fee. Mr. SISK. When the client comes in and you discuss the situation with him, after determining that you can help him and he agrees on the basis of the terms you stipulate, is a contract signed? Do you have some usual form? Mr. HOLLAND. Yes, sir. Mr. SISK. Would you furnish to the committee a copy of your contract form? Mr. HOLLAND. Yes, sir, I will. Mr. SISK. It will be made a part of the record, without objection. We would appreciate your forwarding that. (Committee insert.) The contract form referred to, subsequently submitted, follows:) EXHIBIT 5 CREDIT ADVISERS, INC., AGREEMENT The undersigned Customer hereby employs the undersigned Company to act as Customer's agent in arranging and making payments to Customer's creditors. and the undersigned Company hereby agrees to act as such agent faithfully and to the best of its ability. It is understood and agreed. 1. Application. Customer represents that the application made to Company to employ Company to aid in liquidation of Customer's debts contains a complete and accurate list of creditor's names, addresses, terms and status of indebtedness, payment books and statements of accounts available. 2. Balance of debts. Customer represents that Customer's aggregate present indebtedness is $ The following shall be additions to or reductions of Customer's aggregate present indebtedness as stated above: (a) Interest charges, carrying charges, or such other charges as may be made by creditors, made known to Company after the date thereof. (b) Creditors' balance from time to time added on or added to by Customer to those listed in Customer's application. (c) Creditors' balances desired to be eliminated by Customer from those listed in Customer's application, provided Company has not contacted creditor to be eliminated. 3. Term. The term of this agreement shall be date hereof. -( ) months from the 4. Filing fee. Customer agrees to pay Company as a filing fee to cover the cost of consultation, preparation, processing and reviewing Customer's application. contract and account cards, letters to creditors, telephone calls, and incidental benefits inuring to Customer as a result of Company's services, the sum of twentyfive ($25.00) Dollars. Upon completion of this agreement over its full ( ) months' term and payment of all compensation to Company, Company agrees to refund said filing fee. 5. Charges. Customer shall pay to Company the sum of $ as compensation for services as Customer's agent for the term of this agreement. Company shall be entitled to receive one- -() of its total compensation for each month, or fraction thereof, from the date of this agreement to termination or cancellation thereof. In the event of liquidation of Customer's aggregate present indebtedness by regular payments prior to termination or cancellation, this agreement shall be considered terminated and Company shall be entitled to no further compensation. If Customer makes additions to or reductions of indebtedness as provided in Paragraph 2, compensation payable to Company shall be adjusted therefor on a pro rata basis. 6. Payment. Customer agrees to make payments to Company as follows: on on per promptly each on and the sum of $thereafter until termination of this agreement. Payments shall first be applied to the filing fee as set forth in Paragraph 4, and then to the liquidation of Customer's indebtedness and charges as specified in Paragraph 5. Company shall distribute funds received to Customer's creditors promptly and for the best interest of Customer. 7. Cancellation. This agreement shall be cancellable by either party only upon thirty (30) days' written notice to the other party. 8. Renewal. At termination of this agreement if Customer desires the continued services of Company, Customer shall be entitled to renewal of this agreement upon execution of renewal agreement, upon the same terms and conditions as herein contained. 9. General. Customer agrees to give such cooperation and aid to Company as Company deems reasonably necessary to successfully accomplish the liquidation and/or payment of Customer's debts. Customer understands that Company undertakes only to perform services to accomplish the liquidation, and/or payment of Customer's debts and undertakes in no way to perform legal or other service. Executed at day of a copy of this agreement was furnished to Customer. 19 at which time Customer By: Customer Company Authorized agent Mr. SISK. Upon signing that contract, and here again if I can just outline a hypothetical case, let us say that a man owes $3,000 to a variety of companies. You sign a contract to be of such assisance as you can. What if anything is the initial charge made by your company? Mr. HOLLAND. We have an initial filing fee in the District. That is a charge that is made of $25. This is a refundable charge. It is part of our fee. In many cases we find that we can not fairly deal with his creditors by charging this fee in the beginning and the acceptance of our contract. Our contract does provide as part of our total fee a $25 filing fee that is either refunded to the client upon completion of his agreement with us or becomes the final charge on his contract at its termination. Mr. SISK. That $25, as I understand you to say, is actually only a portion of the 122 percent charge based on the total contract? Mr. HOLLAND. Yes, sir. Mr. SISK. In other words, this actually amounts to an advance? Mr. HOLLAND. That is exactly what it is for. Mr. SISK. An advance of the fee? Mr. HOLLAND. Yes, sir. Mr. SISK. At the time the contract is signed? Mr. HOLLAND. Yes, sir. Mr. SISK. As I understand it, you are representing the Barden Investment Management Corporation. You do have credit adjustment companies or debt adjustment companies operating under a variety of names; is that correct? Mr. HOLLAND. Yes, we do. Mr. SISK. Would you furnish to the committee for the record the complete list of the names of the various companies? Mr. HOLLAND. I will. (The list referred to, subsequently submitted, follows:) EXHIBIT 3 BARDEN INVESTMENT MANAGEMENT CORP., LIST OF AFFILIATES IN THE DISTRICT OF COLUMBIA Credit Advisors of Washington, D.C., Inc., Second Floor, 1413 "K" Street, N.W., Washington, D.C. 20005. Suite #215, 4165 Branch Avenue, Marlow Heights Shopping Center, Washington, S.E. 20023 (not actually in The District of Columbia). IN MARYLAND Credit Advisors of Baltimore, Inc.-Mt. Rainier, Laurel, Hagerstown, Elkton. IN COLORADO Credit Advisors of Denver, Inc.-Denver, Pueblo, Colorado Springs, Ft. Collins, Thornton, Lakewood. IN CONNECTICUT Credit Advisors of Bridgeport, Inc.-Bridgeport. Credit Advisors of Hartford, Inc.-Hartford, Waterbury, East Hartford. IN ILLINOIS Credit Advisors, Inc.-Peoria, Rockford, Springfield. Credit Advisors, Inc.-Champaign, Decatur, Moline, Chicago Heights, Danville, Chicago (Southside), Chicago (Westside), Chicago (Loop). IN INDIANA Credit Advisors, Inc. of Fort Wayne-Fort Wayne, Gary, South Bend, Elkhart, Hammond, East Chicago. Credit Advisors, Inc. of Evansville-Evansville, Terre Haute, New Albany, Richmond. Credit Advisors, Inc.-Indianapolis, Kokomo. IN IOWA Credit Advisors of Des Moines, Inc.-Des Moines, Sioux City. Credit Advisors of Davenport, Inc.-Davenport, Cedar Rapids, Waterloo. IN MICHIGAN Union Credit Service, Inc.-Detroit, Inkster, Mt. Clemens, Ann Arbor. Financial Adjustment Co. of Grand Rapids, Inc.-Grand Rapids, Saginaw, Bay City, Flint, Kalamazoo. IN OREGON Financial Adjustment Co. of Portland, Inc.-Portland. IN WASHINGTON STATE Union Credit Service of Washington, Inc.-Seattle, Bremerton, Tacoma, Everett. Financial Adjustment Co. of Spokane, Inc.-Spokane. Mr. SISK. How many are there? Mr. HOLLAND. There are several corporations but we use only three names: Credit Advisers, which we use here in the District; Financial Adjustment Company, which we use mainly in our home State of Michigan; and the name Union Credit Service which we use on the West Coast and Washington State and in Oregon. |