Archive for the ‘Debt Solutions’ Category
It’s a known fact that debt collection agencies regularly violate the law in the process of collecting debts. Many years of poor oversight and neglect have allowed these companies to cross the boundaries beyond acceptable limits. In 2010 the mortgage industry was exposed for “robo-signing” foreclosure papers on millions of American Homeowners. When it first came out there was a huge uproar and publicity blitz by the banking industry. Sadly, this story has slipped into the shadows of American Consciousness as foreclosures continue to climb unchecked. Many don’t realize that “robo-signing” is the norm for the banking industry, not the exception. Collection Agencies have used pre-signed affidavits for years to validate and confirm debts, many of which are overstated or not even owed at all. This interesting article in the Wall Street Journal – titled Dead Soul Is a Debt Collector chronicles just how bad it is. Thousands of affidavits, signed by a woman who died in 1995 have been used in court to legally validate and document debt. There is no oversight, no morals, no compass for doing a job well. Because it’s in a computer somewhere, right or wrong, consumers are harmed daily by these companies.
Most consumers that I talk with want to get pay off their debt. They simply run into brick walls when attempting to work with collection agencies or original creditors. These tactics clearly outline why it’s important to hire reputable professionals whose objective is to facilitate the mine fields for you. One such company is Debt Pros Group, consumer debt consultants in Redding, California.
In the ongoing discussion of credit scores, it a common belief that credit counseling does not impact the consumer credit score. In fact, some credit counseling companies make the claim that their services do not affect your “Fico Score.” This is normally not an accurate claim. If you had available credit on your accounts, when you enroll in credit counseling, all of your accounts are closed by the creditors. This leaves you with “no available credit” on those accounts and reduces your credit score. Having maxed out credit cards can also be detrimental to your credit profile. The NFCC states “A DMP [Debt Management Plan] could have a negative impact on a credit worthiness decision by a potential creditor, landlord, or employer because it is an indicator that you are or have experienced financial difficulties. In addition, creditors may report that you are on a DMP and are not paying as originally agreed although they have accepted the reduced payment.” In other words, if you ask an auto dealer or mortgage company, they may tell you they consider credit counseling similar to a bankruptcy. Please visit the following links for more information: National Foundation for Credit Counseling
One of the most common questions we get is how debt settlement will impact a credit score. Normally, by the time a client reaches the point of calling for debt settlement help, their credit has already been or is about to be impacted.
If you are current on all of your payments, debt settlement will negatively affect your credit score. With that said, if you can afford to pay off your debt in full on your own, you should do so. There are non hardship programs available that can help you get your spending under control. It is important to note that even if you are current with your payments but your credit cards are maxed out, your credit score profile can be negatively impacted. If you are struggling, are already behind in your credit card payments or feel you may be in the near future, your first goal should be to get out of debt then rebuild your credit profile. As you move through the debt settlement program, each time a debt is settled, the creditor is required to report a 0 balance owing on the credit report. Every credit situation is unique. We cannot predict or make any promises regarding your individual credit outcome after debt negotiation. Please visit the following links for more information:
Debt Settlement is simply the process of negotiating a reduction in the principal balance in your credit card balances. Often it creates a win/win scenario for both the creditor and the consumer. The process is simple, but important, as not everyone will qualify for the program.
To request a free debt analysis, call us directly at 530-222-9500 or request an analysis right here. We will call you back and have an honest discussion with you.
Millions of Americans are struggling with Credit Card Debt. In today’s challenging economy many are finding themselves over their heads due to reduced income, loss of job, or simply because the credit card companies have raised interest rates to the point where the consumer can’t keep up with minimum payments. If this has happened to you, don’t panic. Start by educating yourself on the options available to you. The options listed below, assume that you are facing a financial hardship and that you are struggling to make your credit card payments: Option 1: Consumer Credit Counseling:
Option 2: Debt Consolidation:
Option 3: Making Only Minimum Payments:
Option 4: Bankruptcy
Otpion 5: Debt Settlement/Negotiation
There is no one size fits all when it comes to getting out of debt.
The media is touting the FTC’s ruling as a giant step forward for consumers. The truth is far less encouraging. From my perspective as a debt consultant, much of the media coverage on the issue highlights how misunderstood the consumer debt industry is and how powerful the credit card industry is when it comes to spreading mis-information. While there have been definite abuses by predatory debt relief companies, it’s important to point out that the FTC’s ruling was heavily influenced by the banking industry. This means that the final ruling was lop sided and not necessarily good for consumers. While there are positive components of the ruling, in my opinion, ultimately the FTC ruling will benefit banks more than it will the consumer. Prior to the ruling, the debt settlement industry provided the FTC factual statistics that clearly showed these programs benefit the consumer. These statistics were not taken into account in the final ruling. I will be writing on this in future posts. That said, there are pros and cons to the FTC’s ruling outlined as follows: Pros: 1. Predatory companies, who don’t have the clients long term interest at heart, will be forced out of the industry as they not be able to re-coop costs quickly enough. It will leave only those companies who have the financial werewithal to absorb the high cost of acquiring a client and getting that client started with the program. 2. Initial Settlements will come faster and no fees will be paid until the debt is actually settled. 3. Fees cannot be taken UNTIL a settlement offer has been reached AND at least one payment has been made to a creditor. 4. Fees will be paid when and only when a settlement has been reached with at creditor. (While this sounds good on paper, I believe that this provision will end up working against the consumer in the long run – more below) Negative: 1. The ruling will reduce competition and remove consumer choices. Ultimately this will mean that the consumer ends up paying more. 2. Fees will likely increase. Currently, reputable debt settlement companies, such as Financial Solutions here in Redding, CA, spread fees over a period of months. and do not charge up front fees. That said, typically 5% of the fees are weighted in the first 4 – 6 months which offsets risk and the cost of getting the clients set up. The FTC ruling on the Debt Settlement Industry forces companies to incur large expenses upfront and provides little leeway to cover costs should the high risk clients not follow through on their obligations. 3. It’s possible and most likely probable, that some final settlements will not be as low as we currently experience. As of this writing, Financial Solution’s clients enjoy average settlements at about 41% of the account balance at time of settlement. These settlements are received, in part, because the settlement process involves playing a waiting game with the banks. This waiting game means that the client falls behind on the credit cards, while money is being saved for future settlements. Contrary to popular belief, this rule was established by banks themselves, NOT Debt Settlement industry. Just like in loan modifications, where banks require a homeowner to be behind before assistance is offered, the credit card compaines will not work with consumers unless the payment is behind. It’s illogical to a normal human being, but the computer algorythums that run the financial sector make no allowances for compassion or human logic. Worst case scenario is that the FTC ruling will leave many states without options. Since the FTC ruling only applies when It should be noted, that the comments above are my observations. That said, it bothers me that an agency billed as “consumer friendly” passes down political rulings that take away consumer choice and often hurt the consumer more than they help. Whatever the end result, Financial Solutions will be here to help educate our clients and help them identify solutions to their debt and get on a stronger financial footing.
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A few weeks ago the FTC released guidelines for the Debt Relief industry that will have far reaching implications for consumers who are in financial hardship and having trouble paying credit card debt.