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Credit Counseling & Alternative & Debt Settlement

36 posts in this topic

Link provided by Calawyer:

I have seen a number of posts recently about credit counseling scams and we have also seen some CC spamming here.

The following article is an excellent report prepared by NCLC on the entire industry and the law relating to credit counseling.

It may be more detailed than some of you want, but I think it is a very interesting read:

http://www.consumerlaw.org/initiatives/content/creditcounselingreport.pdf

***

By all means first try calling your creditors to negotiate for hardship programs and reduced interest rates.

If you so choose to go with a CCCS programs, then be aware of these possiblities and cover yourself in the event that something goes wrong.

Read your contract - and understand penalties for not completing the programs, and that sometimes creditors can be hard to deal with should you try and remove your self later from the program. Always best to consult your creditors first and ask what can be done let them know what you are having problems with should you have to consider backing out later.

1. Call the creditor to verify the interest rates which the company claims to have negotiated for you

2. Ask the company what time of the month they intend to forward your payments to the creditors and if this happens to fall past a due day of any of your creditors. Then you need to call the creditor and make them aware that you need to change your due date with them.

3. If the company wants you have your creditors re-direct sending your billing statements to them, instead set up duplicate billing - so if they fail to pay your creditor on time, you will at least find out of it the following statement. Be sure that should this happen you want to make alternate payment arrangements immediately to catch the account up - and ask the creditor for good will not to penalize you by defaulting your interest rate because of the this incedent resulting on the part of the CCCS company.

4. Understand that when starting out these companies most likely will require a first month fee; and won't start paying your creditors until there fee is met in full first. So be prepared to pay double starting out just so you don't result in defaulting the negotiated agreements with the creditors.

5. Yes, some creditors will notate on your credit report that the accounts are currently in debt counseling; and in addition will require that the account is closed.

6. Yes, this is considered just as negative as bankruptcy 13 listings on the credit report. But this is better then defaulting on the accounts because you showed responsibility in taking care of the debt in the end.

*** *** ***

What I would do, when credit card debt is high; is make a list of what companies need to be paid each month. In order of interest rates (not balances).

Exception to this rule is if you currently have any balances over the credit limit, if that is the case pay minimum on all other card and all of the over the limit balance plus $50 to get below the credit limit on the one!

Want damage control as soon as possible in these cases, since interest is defaulted to higher rate and over the limit fees are added (this will get away from you fast if you don't get it back below the credit limit).

On the highest interest cards pay minimum payments on all but the highest interest rate card, double if at all possible the minimum payment on this account.

Also make note of what available credit is on the other cards; and do partial balance transfers of the highest interest rate card over to these smaller ones (be sure to read your policy on both cards to know of fees and such). To decide if this will be beneficial to go ahead and transfer.

Remember you can not balance transfer between affiliated card companies...

This is a slow route to go, but keep your chin up, it is the best way that I know of to rehabilitate this situation. Recommend that you leave the account open; and do so for a period of time for it to help the credit scores increase later as a result of the balance / credit limit ratios decreasing. Don't use it again just put it away until later.

Once you have this completed move to the next card (with the highest interest rate) doing the same exact thing; paying minimum on all others and double on the one (and if possible balance transfer partial balances over to the lower interest rate cards)...again leave this account open, don't use but put away somewhere safe for the time being.

And it may even be that towards the end prior to paying off, your scores might improve enough; to apply for an even lower interest installment loan with local bank or credit union, to transfer debt over.

Periodically as you pay down, keep calling the creditors to review your account; and see if they will lower interest rates for you; or re-age the account (which means they would wipe the slate clean of negative reporting) like lates incurred and revert back to positive reporting. Not all credit card companies offer re-aging; but with a try to ask on this part.

It is a good practice to get into using installment loans; they are a sound financial decision which at the same time, does not tempt responding like revolving accounts do. And also at the same time you are developing good solid relationship with these banks & credit unions that you can fall back on later when need be.

* With this method; you take control back, and the creditor is not going to necessarily force you to close the accounts as would be required with the CCCS program. (which would further hurt your credit). The idea is to over come but at the same time, rebuild instead of destroy like so many other means out there can do to the credit.

Also recommend highly that you take a class with the local college on personal finances; to empower yourself further to get back on track and be more financially minded to apply and use the best type of credit the best way possible.

When all is said and done then go back to the credit cards which you have and consider these things:

Long established History

High Credit Limit

If the account is positively reporting (no lates..collections...charge offs)

And over all satisfaction with the Creditor

Also if these cards are able to cover purchases anywhere (not department store cards).

These are the cards to keep (should limit your choices to 3 or 4) and Close the rest!

Also you might consider asking good will of the creditor if they would review your account and having proved your worth for them to remove late listings and the such on the credit report.

This is so important to ask for since it affects your ability to establish and maintain good interest rates with the other creditors out there that would periodically review your reports (and as a result might increase your interest rates with them). unfortunately.

Best of wishes,

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I wonder what anyone thinks about companies that mortgage companies reccommend? Like FHA and Fannie Mae seem to support the use of Green Path Debt solutions, think thats it name. Do you know if when you go for the housing classes, do they try to get you to sign up for credit help?

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That is what makes me mad, cause some of these companies are backed and recommended on a regular basis - I am hoping this will change soon, Georgia just recently changed their laws dealing with these companies; think I stuck it up in the Artical of the Week section; will have to look can't remember what they changed; but it would be a good change for all states.

Better yet, if all these companies were shut down in place of companies that get sound financial advice and taught people instead how to handle their finances and help them do their own negotiations instead of taking over the messing everything up.

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Debt Settlement Companies are not the same as Debt Counseling Companies (Debt Consolidation).

1. You have to pay a start up fee

2. You set up a savings account

3. You sign over a limited power of attorney

4. You set up for your creditors to mail billing directly to them.

5. They take a percentage of the money they save you after settlement has been accomplished.

Find that most people believe these companies to step in immediately and settle up with the creditors / collection agencies. That is not going to happen!

They are going to hold off paying the creditors as long as possible, even as far as you receiving notice to appear in court. Once that happens then they send letter to the collection agencies to validate the debt, and then start negotiating for the lowest amount to be paid.

1. The collection company does not have to deal with these debt settlement companies and you may just find your self having to appear in court, you are still accountable for their actions - should they fail to succeed.

2. This is far worse then debt consolidation in the fact that the creditor is being settled with not paid in full, so when you try to go for a loan this will look bad on your credit report.

3. If you had creditors that started out as agreed, no lates or collections prior to this company stepping in, that will no longer be the case by the time they are done. All accounts will be charged off and reflecting so on the credit report. They are not in the business of cleaning up your credit report - they are in the business of saving as much money as possible and will destroy your credit in the end to meet their goal.

Negative information will remain on your credit report technically for 7 years, collections; charge offs; judgments resulting from your encounter with these companies.

So please becareful of what companies you deal with, debt consolidation is a bad company to go with, but these debt settlement companies are just preying on those in desperate need.

Should you find yourself already in the middle of being signed up with one of these companies, you should immediatley stop (there may be penalties incurred) but you will be better off to get out from under this type of company. And deal directly with the creditors yourself to resolve the problem and save your credit rating.

Recommend that you contact your local general attorney or states attorney about the matter, and also file complaint with the FTC and BBB.

www.ftc.gov

www.bbb.com

The more people to voice discontent with these companies and they hopefully will start to shut them down.

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I was not aware that using a debt counseling company was the same as debt consolidation. I thought that debt consolidation was the process of taking all the debt from credit cards and auto loans and moving the debt to one account and paying off all the other accounts the same month as the debt transfer. Usually this is done by getting a home equity line of credit against a home or other real-estate. The interest rate is close to prime so a lot of money can be saved on interest and because all the credit cards are paid off, assuming the cards are left open, the % of credit utilization should drop quite a bit resulting in a big credit score increase.

The only down side to doing this is that one is taking unsecured debt and moving it to secured debt.

I was under the impression that with credit counseling companies that one sends them a check each month and they, in turn, are supposed to send check out to ones lenders. I don't see how this is debt consolidation.

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Consumers should be aware that the vast majority of these so called "non-profit" credit "counselors" are primarily funded by the banks and credit card companies themselves.

So if a consumer is looking for ACTUAL, fair and unbiased credit counseling, (usually after the consumer is in default) most of these places do not provide it. It is a huge conflict of interest (to say the least) to have the banks and credit card companies posing as independent "counselors".

This would be like being charged with a crime and then asking the prosecutor (who doesn't tell you he's the prosecutor) for "counseling" about a defense.

These "bank owned", "counselors" will almost always advise debt consolidation through the use of second or third home mortgages. Which in most cases, is the same as turning unsecured debt into secured debt. This way, if the consumer defaults on what WAS unsecured debt, the banks and credit card companies can NOW go after the home. These creditors in "counselor's" clothing, also hate the "B" word. (bankruptcy) They will go on and on about the horrors of filing bankruptcy. If pressed for information, they will mention chapter 13 but chapter 7 will treated either as though it doesn't exist or it makes hell look like a Carnival Cruise.

It's not counseling. It's a railroad job and the cards are all stacked against the consumer.

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I agree: avoid the Debt Settlement Companies.

Unfortunatly I didn't find this site until recently.

I lost my job after 9-11 and was unable to keep up the min payments on my 6 accts. I searched the internet to try and find a solution other than BK. I came across a site for a Debt Settlement Company. It sounded great and different than all the counseling,consolidation etc.

As stated above, they tell you to stop paying on all the accounts becasue the companies will not be willing to negioate until the accounts have been deliquent for a few months. After being in the program awhile I began to fiqure out how they operate. They only handle one account at a time. Usually the one with the largest amount owed since they get paid on a % of what they save you. Meanwhile the other accounts start building up interest charges at 20% or more.

It's ironic that I freed myself from this company by getting a call from a collection company. I got a call from a collection company. As per the instruction of the settlement company, I told them you need to talk to PBS they are handling my accounts. I was about to end the call when the CA said, " we just wanted to inform you that we will be filing for a judgement since you did not respond to our offer several months ago"

I said, "I never recieved info about an offer." They said, we offered PBS a settlement of 50%,6 months ago and they never responded. Now I was pissed because I had told PBS several months before that I had some extra money and I just wanted to settle these accounts. So thinking quickly, I asked the CA if they would still settle for 50%. They agreed. (unfortunately I didn't know enough to ask for negs to be removed ) On the bright side, I saved the $600 fee i would have owed to PBS. Would you believe they still said I owed them the fee. I told them they breached their contract by not informing me of the 50% offer and I was not paying them a dime. Their response was, "well we don't forward settlement offers that we think are not good enough and we can get better". In other words, we don't cafre what you the client wants, we just want to get the biggest fee we can.

Bottom line, after reading info on this site I realize I could have gotten all the deals by myself and I would have saved the fees I paid them.

Maybe I should sue Google for not pointing me to this site. :-)

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I confessed to getting suckered into a Debt Settlement firm "National Debt Network" - this was 3 years ago and my CR is officially HOSED! All sorts of charge offs showing and the 2 small settlements they negotiated for me don't even show as settled on my CR. ANYWAY - Doc suggested i sue them. Has ANYONE had any experience with this sort of suit?

Anyone who has dealt with NDN or other settlement firms, please share!

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I am responding to this string because I went through a debt settlement program and was not lied or cheated. They were very informative and spent a lot of time with me covering how the program WILL affect my credit in a bad way. But the company that I went with regularly came to me with settlement offers from my creditors. The whole time was very stressful though. I felt that my credit was getting ruined. But the truth was that I was in trouble and didn't have a lot of options. I was going to go with a Credit Counseling Company but after some research I found that they didn't do anything that I wasn't or couldn't already be doing. When I called the Debt Settlement company, they told me that I could do this myself!

The truth is that now I have credit rating that is growing as I reenter the market. However, I am not going to get carried away with my credit. The was it was is that I had almost 30k in debt and was only paying monthly minimums. It sucked! I wasn't gonna get ahead. And because my debt to income ratio was so high, I couldn't get a loan and my credit rating was 700+! That just seemed stupid to me. I thought that I should be able to get what I want with my high credit score. But that is bs. And I understand that now. Besides, I didn't want to put my house on the block for this debt because I was already having problems making my payments.

To make a long story longer, I went through a debt settlement company and was finished in 3 years. Not 10! That was worth it to me. Plus they negotiated with my creditors to make sure that the settlement included that they would report settled on my report. And they did. So there. I have recommended to a friend and hopefully she gets some helpd.

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My situation was similar. I didn't have a lot of options and I was very leary of credit counseling and debt consolidation. Anyway I was referred to a company by a friend, that had used them before. They gave a lot of helpful advice and did not try to force sell me into the program. However, once they explained to me how I they could reduce my debt by at least 50-80%, I was willing to try. However, I did do my research on the company to see if there were any negative complaints. Well there weren't and since they had a good record with BBB. I went ahead with it. To make a long story short, they got my interests rates and late fees taken off completely and got a percentage of what I would have originally owed reduce as well. Debt that would have taken me 8-9 years to get out of only took me 2 1/2 years. Always check out a company's credentials and find out how long they have been in business, if they have any negative complaints from consumers against them. Get everything in writing, so that you get exactly what you want. This will avoid digging yourself in a deeper hole.

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The difference between Debt Settlement and credit cousneling...

Look, the industry is saturated with scam artists and seriously inexperienced individuals who enter this extremely lucrative biz to make a quick buck. Money is the objective for most. However; the bottom line is that the business models do show benefits. Contrary to many posts here, Debt Settlement is the best choice for anyone who is tired of making their monthly minimum and never seeing a change in their principal. Really, you don't have a choice.

Credit counseling is clearly run by the credit card companies. These companies are considered "non_profit"? HAHAHAHA!!! So then why does the owner of the co. I worked for have a private jet? These companies charge you a fee plus they get a fair share from the creditors. Believe this...most counselors charge a set up fee which is your first payment. So, since your first payment is not going to creditors guess what? You are now late and your interest is at 23-29% or worse. If you were current and had a good apr then that is gone. In addition, whatever the uneducated counselor quoted you as a monthly pay is now not going to be. Furthermore, the programs that are used by counselors to estimate your monthly, estimated savings, program length are all adjustable. Meaning, the counselor has the capability to enter any info. they want to make their program sound more appealing. I was trained to change %'s, monthly's even change the creditor all together to make the clients program appear more attractive. This place was run by an outfit of ex-collectors. We were told to sell and do whatever it takes to sign the person up. If you did not meet your quota you were fired. Another fee is paid out by the creditor. Each monthly payment you make to the creditor, a portion of which is returned to the consolidation co. which is called fair share.

Counselors "Sales Person" are mostly paid commission only. I was given a weekly draw of $300.00. At one point I owed the company nearly $1000.00 when I first started. This company was one of the 3 ISO certified companies in the US. They had over 40,000 clients when I left.

The building held about 150 employees. Their sales floor consisted of 125 counselors. Leaving only 25 employees for customer service and administrative staff oh, and their executive director attorney who I never saw in the building once. They kept their customer service and sales people on opposite ends of the building and required us to leave through different exits making sure we did not associate with one another to find out what really happens behind the scenes. Of course, in time you learn what its all about and if you're anything like me you get the hell out of a place like this.

This was my first job in this industry and from the initial training and education on how creditors work and how a "good" consolidation co. can actually help someone I felt good about what I was doing until I figured it all out.. When I left, I went to work for a Debt Settlement co.

I work for a co. who has never had any complaints with the BBB or any A.G. and is very well run. Credit Counselors have a 90% drop out rate within the first year of the client signing on. I believe this is because most companies lie about their fees, low ball the client on their monthly or they just do not see a change in their balances.

Debt Settlement does hurt your credit however; you are out of debt within 3 years or less. Once you are done, you can begin rebuilding your credit.

Its not the end of the world. Your main objective should be to get out of debt and start over. Credit counselors put a CC on your credit report for 10-13 years which becomes public record which is the same as B/K 13. Ask a mortgage broker. Its true.

So, really the only difference is that your credit will suffer no matter which program you choose but if you choose consolidation, the average program length is 7-10 years if you're lucky. Debt settlement is no more than 3 years and on the average you pay only 60-70% of your total debt including the Co.'s fees.

What is most important is finding a good co. If you look at the BBB reports for these companies I know it will be difficlut finding one with no complaints but find one who has been in business for at least 3 years and has no complaints. The industry is new so there are not many who have been operating for more than 3 years. You want one who has been in business for a good amount of time to show they know what they are doing.

Credit counseling is bad business!! The co. I used to work for was closed down by the FTC about 1 year ago and believe me, there will be many many more whose doors are closed soon enough.

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I still believe it is far better for the consumer to negotiate their own settlements and not bring in a debt settlement company.

Just have to take time, don't let the collection agency rush you. Make sure where you stand on the debt (check if it is out of the statute of limitations). If it is you are not legally responsible to pay the debt back - it differs for each state.

If you are still within the SOL, then try debt validation, if that does not work and they validate the debt move towards debt settlement.

Get everything in writing, try to get deletion of the account listing that is the best outcome for payment. If you settle for less then full balance try to get deletion, but if not try next for payment in full reporting even if it was settled for less.

Make sure that you put in the letter that they agree not to sell the remaining amount of the debt, that the account is closed and no further collection efforts are made.

They will send consumers 1099C if the amount saved exceeds $600, then you will be expected to pay interest on the money saved. If they send one out to you, keep a copy for your records should they try to later collect on the debt.

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Debt settlement companies are not all bad. Some can be very good.

Most of what is said in this forum is correct. In a lot of cases you are much better to negotiate yourself...

But what if you can't?

CCCs' are a joke. If you can afford Credit Counseling then you don't need it. Period.

There is absolutely no excuse for bankruptcy. It may be ethically correct for some, but it is never morally correct.

You must look at all your options; see the pros and cons, then make a decision based on your given problem.

A debt settlement company might be best for one person, but not for another.

Doing a roll-up method maybe right you, but not your neighbor.

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I confessed to getting suckered into a Debt Settlement firm "National Debt Network" - this was 3 years ago and my CR is officially HOSED! All sorts of charge offs showing and the 2 small settlements they negotiated for me don't even show as settled on my CR. ANYWAY - Doc suggested i sue them. Has ANYONE had any experience with this sort of suit?

Anyone who has dealt with NDN or other settlement firms, please share!

Report them to your attorney general's office. Also file a complaint with the better business bureau.

I would recommend posting in the lawyer section, get legal advice.

There is absolutely no excuse for bankruptcy. It may be ethically correct for some, but it is never morally correct.

To the last poster you are wrong, there is nothing moral about bankruptcy either you can pay or you can't. And if you can't and there is a chance of loosing property, then yes by all means contact a bankruptcy attorney and get advice on your individual situation.

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Has anyone heard of Accelerated Debt Consolidation they are in Florida?

I called them becasue I have a large credit account 4 months past due and I am getting nowhere with it.(HSBC)

The interest rate is so high.24.99%and the MIn. Payment went up in Jan.....The account will be charged off shortly and already has a agency "handling" the account for them

This Accelerated Debt Consolidation say they can get the Int. rate down to 9%, and cut out the late fees etc if HSBC will accept.

I have tried to do this myself and claim hardship etc, with this credit card company and they will not budge with me.

And this debt. consolidation will not want me to place other accounts and the maint. fee is 19.00 month.

I don't know if I should do it or not. I don't know what else I can do. I tried to get a low Int. loan with no luck.

I know with this account being so high it is not ever going to go away, and eventually i will probally be sued over it.

Any input?

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I have one credit card that I can no longer manage. I was on a promotional APR that just ended and my payments have gone up $300. I am already paying out $600 a month in credit card debt alone. In the past year I have gotten serious about paying down my debt - but the $600 is all I can manage and to be honest there are some months when unexpected expenses arise when even that is a challenge. I have never been late with a payment and have a very good credit rating - but this one card is going to sink me.

I have looked into debt consolidation, after reviewing my situation their advice was to get a better paying job. Debt settlement companies seem exceptionally sketchy - I called the creditor directly they advised to get a lean against my home but I don't have enough equity in it yet. Then they sent me a letter that they had closed my account.

I have thought about concentrating on paying my other debt and just letting this one credit card go (I have $20K in debt with it) - but don't know if that is legal or if I will be screwing myself. Any suggestions?!

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I am dealing with a debt settlement company now called Lawgistics. I am trying to stop business dealings with them. I may need to sue them so if anyone knows any good lawyers in VA please let me know.:)

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SIFXPERT is a paid DS representative. He was banned for soliciting members for his own profit. Using this site to shill products for your own profit is prohibited by the terms of service. We advise all members to avoid his sort of "service."

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I am new but have found a wealth of information on this forum. I am in the process of deciding whether or not to use DMB (debt solutions) to resolve the over $200,000.00 in credit card debt. I am told that I can have all debt resolved in 44 months and decrease my current total monthly credit card payments by $2,000.00. I am not behind on these accounts and yes my credit score has dropped (debt to income ratio). I am tired of feeling like I will never get out of this unsecured debt. The majority of the debt is with Bank of America and it was originally MBNA debt. Has anyone ever used DMB? I really thought this was the best solution, but after reading your forums...I am not so certain. Any suggestions would be appreciated.

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Hi So glad i found this site too. I sent in to Better Business B

about debt consolidation companies and one of the above mentioned type

companies was on their list but after more search I have learned

that BBB ratings can be deceptive too. So I held off, but might have dove in

also! It's so hard to know who to trust. Now i am going to look into Debt Management programs, which still make regular payments to your cards through them (of course would verify that they are...) not hold off paying until companies are ready to negotiate like the other groups ask, which never felt right to me.

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