Debt Relief' just made debt deeper: Minnesota Attorney General is suing three debt-relief companies.

Until the phone call, Rossie Anderson-Howze didn't think she needed help negotiating her $12,000 in credit card debt. But when the company promised to cut the retiree's 12.9 percent interest rate and save her $4,000 or her money back, she agreed to let Moneyworks LLC charge $1,090 to her card.

The company failed to deliver on its promises, she said, forcing Anderson-Howze, of St. Paul, to become one of hundreds of Minnesota consumers to seek help from Minnesota Attorney General Lori Swanson.

Swanson sued Moneyworks LLC and two other debt assistance companies on Tuesday, alleging that the companies made unsolicited phone calls promising lowered interest rates, guaranteed savings and money-back guarantees. Swanson alleges that Washington-based Priority Direct Marketing, Clear Financial Solutions of Florida and Moneyworks LLC, based in Georgia, "charged financially strapped people a lot of money to lower the interest rates on their credit cards, only they failed to do so, leaving people even further behind on their bills."

Attempts to reach all three companies were unsuccessful.

The calls promising lowered interest rates come at a time when credit card companies have been raising rates, even for consumers with stellar credit. Swanson said debt assistance is just the latest "cottage industry" that's formed to "capitalize on the bad economy." Attorneys general around the country, including Swanson, have sued mortgage foreclosure consultants and health care credit card companies since the recession took hold.

Swanson hopes the lawsuit will shine a spotlight on these companies and help locate the individuals behind them. No principals have been identified yet in these cases, but Swanson suspects that a few people are behind many of the "fly-by-night" debt assistance companies. Swanson said Moneyworks LLC and Clear Financial Solutions already have stopped answering some of their phone lines.

Swanson also sent a letter to the Federal Trade Commission asking it to adopt federal regulations to prohibit companies from charging consumers until services are delivered satisfactorily.

Like most victims, Katelyn Brin of Oakdale received an unsolicited phone call from a Moneyworks representative who knew about the financial institutions she uses, her credit card balances and her interest rates, causing the William Mitchell law student to believe the company was affiliated with her bank. It wasn't until she saw no savings and was told she couldn't get her $990 back that she realized she wasn't working with her bank at all.

Sounds like a bank:

Swanson said consumers with good and bad credit have reported telemarketing phone calls from "card services" or the "customer service department" followed by the name of the consumer's bank or credit card company.

Besides stating personal financial data that give the representative an air of authority, the companies claim they have employees with special expertise in negotiating with creditors. The lawsuits allege that some callers even mentioned a link to the stimulus working its way through the economy.

Moneyworks called Anderson-Howze's creditors asking for a lower rate, but her creditors refused. The company sent her a packet of information with advice such as paying more than the minimum balance to pay off credit cards sooner. "I was paying maybe two to three times the minimum balance" before paying Moneyworks $1,090, she said. She asked for a refund but got nowhere. So Anderson-Howze complained to the attorney general's office. "It just wasn't right, by calling people and saying they could do something."

There are legitimate organizations that can help individuals deal with unmanageable debts. The attorney general's office directs consumers to credit counseling nonprofits that are members of the National Foundation for Credit Counseling (www.nfcc.org) and don't charge large upfront fees. Many of these nonprofits offer debt management plans in which the agency negotiates lower rates and fees with creditors and creates a debt management plan that the agency then administers for a small monthly fee. Or you can do it yourself.

"You as the consumer can call and ask your company for a temporary or longer-term lower payment or reduced interest rate," said Darryl Dahlheimer, program director with Lutheran Social Service Financial Counseling.

Also, any reputable counselor will say getting out of debt is an arduous process requiring sacrifice and hard work.

"There is no easy bullet or magic solution to getting out of debt," Swanson said.