Cookie Gill knew she was in trouble. A single mother adjusting to a new job in the Valley, her credit card payments were out of control. She felt trapped and afraid. "I was living on credit cards. I didn't like it. I wasn't using credit cards to buy diamonds. I was buying food," she says. "Still, I knew it was getting bad."

So when a kind gentleman from Miracle Management called, Gill thought it really was a miracle, a true answer to her prayers.

"I said, 'miracle.' I thought, 'It's a Godsend,'" she says. Miracle Management seemed like help sent straight from above and its salespeople acted like angels on the other end of the phone.

A few days after Gill paid the $699 fee to join the credit counseling service, she noticed the angels were harder to get a hold of and a lot less talkative. The rest of the story, she says, reads more like a nightmare than a miracle.

Credit Crooks

Stories like Gill's are becoming more and more familiar around the Valley. As credit card debt has mounted nationwide, so have the number of debt consolidation scams, and they don't just affect the poor.

"You would be surprised. We have people in our program in debt from $9,000 up to $175,000 in credit card debt," says Adam Brauer, president of Scottsdale-based Debt Settlement USA. "Credit card debt covers everyone. We have everyone from police officers to doctors to lawyers."

Brauer is one of many in the credit industry concerned about the growing number of fraudulent debt services. Masquerading as debt consolidators, fraudulent credit services prey on credit-strangled consumers by making big promises, demanding the last few bucks they have and then vanishing, leaving them deeper in debt.

In 2004 the Federal Trade Commission warned that "advance-fee" loans and credit offers were the most popular scams in the nation, having already lured more than 4 million credit-troubled Americans.

Scams In Our Backyard

Scottsdale-based Miracle Management Group (MMG) still owes Gill about $1,000, that despite a consent order issued by the Arizona State Banking Department. But Gill's $1,000 is only a fraction of the money MMG has been ordered to repay its victims.

Brauer says Gill's situation is not unusual in the industry. "We had somebody who had been with a different company and had scraped together $4,500 as an upfront retainer and called them two days later. Their phone number was disconnected," he said.

Many will never see justice. "That $5,000 might as well have never existed. I know we'll never get it back," says 31-year-old Melissa Coggins. Coggins, a wife and mother of two, thought MMG's program sounded like the best of the debt counselors she had researched on the Web.

"They were supposed to help us, but they put us further in debt," Coggins says. Raised by a family with a strong work ethic, Coggins and her husband believed they should do everything in their power to repay their debts before considering bankruptcy.

"We trusted them to help get us out," she says. But months after MMG had been taking $750 a month from the Coggins' bank account, their creditors still hadn't received a single cent.

"Altogether, they took $6,000. They never paid any bills to any creditors," Coggins explains. Meanwhile Coggins says her husband, Andy, was working two jobs to make the hefty monthly payments for MMG.

"We felt like we were drowning," she recalls. "Eventually our credit cards got so far behind we had to file for bankruptcy, at which point we were supposed to get $5,200 back from MMG. We've been calling them ever since."

Dancing With Wolves

Like many burned customers, Coggins thought she had done her homework. "We had gone to the Better Business Bureau, but we didn't know MMG had changed names several times," she says. "When we signed up with them, the name they were giving us was a different name than what they were doing business under."

Brauer says a recent name change is one of many red flags that should raise suspicion about a company. He recommends that anyone looking for credit counsel check out how long a business has been operating under its current name. MMG for example, had been Jubilee Financial shortly before enticing Gill and Melissa Coggins into their program.

Brauer's Debt Settlement USA is one of a handful of Valley debt counselors that has not changed its name, location or phone number after several years of operation. He says about one-third of his customers have been burned by other debt or credit offers.

In a 2003 report, "Credit Counseling in Crisis," Travis Plunkett of the Consumer Federation of America says, "It is virtually impossible to distinguish between the honest, caring agencies and the rip-off artists by just looking at a TV ad or making a quick phone call."

Brauer suggests some of the indicators that can often expose fraud. In addition to frequent name changes, he cautions that an upfront retainer fee is the easiest fraud-alert to spot.

"Unfortunately, there are quite a few unscrupulous companies out there. You just go back to Ameridebt," Brauer says. Ameridebt, one of the largest consolidators in the nation, was shut down nearly two years ago after defrauding thousands of debt counseling customers and charging consumers more than $170 million in hidden fees.

Consumer Advice

"Consumers really need to know that if somebody's telling them they're pre-approved it's baloney," says Ed Madgeson, founder of Ripoffreport.com. "If you're actually pre-approved they would already have your information, so they wouldn't need your credit info."

Madgeson's consumer Web site provides a forum for scammed consumers to voice their complaints. Of more than 200 scam categories, Ripoffreport.com visitors have lodged more than 14,550 "credit" related complaints. Compare that with only 3,300 "auto dealer" complaints and just over 1,000 "false TV advertisement" complaints.

"One of these debt-consolidation companies out of Florida has been threatening me," Madgeson says in a phone interview. "I've talked with some of their victims from years ago. Some debt consolidators even threaten that they'll destroy your credit."

Coggins for one wishes she had visited Ripoffreport.com before signing up for MMG, which checked out fine with the Better Business Bureau, but has numerous Ripoffreport.com complaints.

Speaking of credit and debt frauds specifically, Madgeson says, "Some of these companies are in Scottsdale."

In addition to MMG, a separate Scottsdale company is accused of offering credit cards for an upfront fee of $269. But consumers don't receive a credit card in the mail. Instead they receive a pamphlet suggesting nine credit card offers for which they may or may not be qualified.

Madgeson also cautions against free credit reports, which he says often retrieve personal information for resale.

Frauds on the Run

Despite Federal Trade Commission warnings that scams like MMG's are multiplying across the country, little is being done to ensure fraudulent companies don't reopen shop in different states, under different names.

When asked what will prevent MMG from taking its operation to another state, the Arizona State Banking Department had little to say. "To the extent that they're properly licensed, there's nothing to prevent that," says Kevin McCullough, Assistant Superintendent of the Arizona State Banking Department.

"Normally, other states inquire if there are regulatory actions. That state has to evaluate that situation. Other than being available for inspection by other states, that's it," he adds.

But companies like MMG rarely apply for the appropriate licensing when they move to a new state. In fact, MMG was never even licensed to practice debt consolidation in Arizona.

McCullough says his department's jurisdiction ends with the fines and restitution payments required of MMG.

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