Credit Card Debt Reduction Companies Are They a Scam
82A look into Credit Card Debt Reduction Companies
Hi my name is Stephen Bis and I have been working in the credit card debt reduction industry for over 10 years now and have been in the financial industry for over 20 years. The reason for me putting up this hub is to give American consumers a heads up on credit card debt reduction companies also known as debt settlement or debt negotiation companies. I will give you the advantages and drawbacks of this process and what to look out for when speaking with a company to assist you in getting out of debt. Before I go any further I would like to let you know this will be a pretty long article and by the end of it my goal is to have you completely comprehend how the debt negotiation/settlement method works in case you don’t already know and I would like you to know the tactics of companies out there that don’t truly have your best interest in mind.
For starters I would like to state that the procedure of debt negotiation as your means of credit card debt reduction isn’t for all, some folks are more qualified for bankruptcy and others simply don’t have the right mindset to go forward with this process.
I would like you to first understand what debt negotiation is and how it works. The ultimate goal of a debt negotiator is to obtain a debt settlement for the client on the current debt amount owed to the creditor. So for example you may owe one particular creditor $20,000 so the goal of the negotiator would be to have you end up paying back at most around $12,000. The two primary benefits of going through this process are to save money on what you currently owe the credit card companies and to save time. By merely paying the minimum payment with even a moderate interest rate you will be looking at thirty or more years to get out of debt, with a manageable debt negotiation program you will be out of credit card debt within three years or sooner depending on your current financial situation and how fast you can accumulate the funds to do so.
Now you must realize these are tremendous financial advantages but as with everything in life there are a few downsides, nothing is perfect and this credit card debt reduction procedure is certainly no different. First off your creditors will not be in a position to negotiate a debt settlement at all if you are current and on time with your minimum payments. They would love for you to stay running on their credit treadmill for the next three decades and pay them back over five times the balance in interest alone. So to be clear the account must be into default first in order to begin the process of negotiations with the credit card companies. I'm not advocating someone who is perfectly capable of paying to quit paying their bills. This process is really for someone who is already in default or realizes that it's only a matter of time before they will default.
So naturally for many people the beginning of this procedure will have an adverse effect on their credit rating. For the consumers who are already in a default status then the negative effect will be no different than it already is. It’s sad to say but for some people this will be the one factor that holds them back from going into debt settlement making them a slave to their creditors for the at least the next three decades. But there is good news, this negative effect does not last forever, in fact once the settlements get paid off your credit score will begin to recover and shoot back up. The reason is because over 30% of your credit rating according to Fair Isaac’s MyFICO is based on how much debt you owe. So if you are trapped in a bad debt situation even if you are up to date with your payments your score is more than likely not all that great in the first place; and besides when stuck deep in debt your number one priority should be on how to get out of credit card debt as soon as you can, not on your ability to accrue future debt.
Now by falling behind on your payments you must realize that these creditors are just not going to leave you alone, they will be calling to attempt to collect the debt. For some people this is not an issue at all, for others it is, that is why I mentioned above this process is not for everybody and the consumer must be in the right mind set. From all my years of helping American consumers there is no rhyme or reason to how many collection calls you will receive, some clients of mine rarely get calls while others get them on a daily basis. Something to keep in mind too is that no organization has the power to legally stop the calls, so any company that tells you they can is flat out lying. Some companies may be able to cut back some of the calls but no one can guarantee them all stopping. As you can see like I said earlier there are advantages and drawbacks, but if you are willing to accept the drawbacks you will be quickly on the road to debt freedom and will save a ton of money in the process. Now to get to why I named this article “credit card debt reduction scams”.
We living in the United States over the last few years have been going through a very bad downswing in our economy. Thus forcing many consumers into compromising positions financially, leaving large sums of Americans riddled with credit card debt. So understandably this opened up a much bigger marketplace for debt reduction. Many fly by night organizations have been shooting up all over our nation, many of which are ex mortgage lenders who sold people sketchy loans and helped them get into this messy position to begin with. Now I use the word “scam” which can take on a couple of different meanings, while sure there are some companies out there that are flat out scams and have no real intent on doing any work for you at all, most of the times that is not the case. Instead a lot of companies simply don’t offer people all the truths on how debt negotiation works nor do they honestly put them on a plan to succeed, which I will explain more in depth momentarily.
One common problem that many folks have with debt settlement companies is they do not fully disclose to them about how the process is going to work, instead they sugar coat everything and go on about the wonderful benefits. I have spoken with numerous amounts of people who have enrolled with a company and were under the impression that they were going to stay current and be on time with their creditors and will never receive any collection calls. So without needing to mention this became a big problem once they began the program.
Another big problem a lot of these companies have is misleading people into the type of savings they will be receiving on their debts. Some companies will say they can save you 70% of what you currently owe. Now while they may achieve getting settlements that low what their opting not to tell you is how much you will be saving after you have A) paid their service fees, and B) paid back your creditors. Truthful companies will tell you what your true savings will be. If you will save somewhere between 40-50% of what you owe including their fees and paying the creditors than that is pretty darn sweet of a deal. In addition most of these companies will try and guarantee a certain percentage of savings, if you hear this run for the hills. NO one in this industry can guarantee a certain amount that is why it is called DEBT NEGOTIATION! They are negotiating to get a settlement for as low as they can get. With that being said right now some companies are achieving amazing results because of how badly the creditors need money due to this bad economy. There has never been such an opportune time for consumers who are struggling badly with debt to take advantage of the great savings they could realize from debt settlement. Perhaps being one of the only benefits of this horrible recession.
Then there are the companies who will let you pay whatever you can afford to sign up with their program. These are the most evil because they do not actually have your interest at heart and know they are putting you on a program to fail and not succeed. You must realize to achieve the sort of savings I stated above this process should take no more than three years, preferably two or less, in some rare cases it can be extended to four. And the bottom line is some people realistically cannot afford to get it done in that time schedule and should realistically be looking into a bankruptcy proceeding. What these unprincipled credit card debt reduction companies will do is place you onto a program for 4 or more years and basically take whatever payment you will give them. Knowing full well you are not going to be saving much of any real amount of money and will more than likely flunk off the program, all they are concerned with is getting the fees and that is it. A sincere company will thoroughly review your finances with you and make sure this is something that you can budget, as well as fully clarify to you both the benefits and drawbacks of doing this. And let you make the conscience choice as to whether this is the best credit card debt reduction method for your state of affairs.
Another extremely effective way to evaluate a company is to make sure they are registered with the BBB (Better Business Bureau) and that they are in good standings with a very little amount of complaints. And if there are complaints make sure they were resolved to the clients liking.
Like I mentioned I have been in this industry for over 10 years now and currently I work for an exceptional company with a great track record and an A rating with the BBB. If you want an honest evaluation of your debt situation to see if this is the right system of credit card debt reduction for you than follow the link below and fill out an application and request speaking with me. I will review in great detail how this process works and whether you are a valid candidate. I hope after reading this article you feel more enlightened as to how this process works and what to look out for when you are speaking with companies to potentially help you get out of debt.
vote upvote downshareprintflag
- Useful (16)
- Funny (1)
- Awesome (1)
- Beautiful (1)
- Interesting
CommentsLoading...
Wow, so much information. Today, people everywhere are looking for that magic bail out, and many times, they turn to these companies. It is good to see some real information on these companies out there. Thanks for sharing your knowledge and experience, hopefully it will help many people.
Thanks for sharing these information..^^it has been very helpful!
It's so easy to get into debt in the first place but once we've learned our lesson it's time to do some damage control.
Wow, that is certainly an incentive to use credit card debt reduction companies if you can reduce your get out of debt period from 30 years to 3!
As you say, though, credit card debt reduction companies are not for everyone. For people whose aim is to always have a good credit rating, they can't use this option at all.
But this is really useful information, and I'm sure many people can benefit from it because there are just so many people who have massive credit card debt. Those credit card companies just keep on giving credit until people have got no way of paying the debt back, other than to resort to credit card debt reduction companies.
Interesting hub, but I heard that using a service like these can have a negative result on your credit report. How true is this?
Yeah, when done right, I think debt negotiation is the way to go, and I do understand that there is a lot involved so picking the right company to do it with is pretty key!
It can have a negative effect on your credit because you must fall behind on payments in order for the creditors to negotiate a settlement. However the damage is not forever and no where near as bad as a bankruptcy. Many people are already in the process of falling behind on their payments when they enroll and for them this process will not damage their credit anymore than it is already being damaged.
You must weigh your options if you are current, would you prefer to keep paying them high minimum payments for what very well might be the next three decades or do you want to get out of debt quickly and move on with your life.
I hadn't realized that you could save so such by going through a debt negotiator. I think it is a good time to get the word out about this with so many people struggling in debt right now?
When would it be better to go the bankruptcy route?
Bankruptcy is for people who can truly not afford to do anything else. It should be avoided if possible. Reason being bankruptcy not only has a very very bad effect on your credit, but it will also remain a public record for the rest of your life. In addition most people only qualify for a Chapter 13, this process puts the court in control of the debtors financial situation. And this can be very frustrating, embarrassing and is not pleasant. So if possible avoiding bankruptcy is advisable.
However for some people they simply have no choice, I have had to advise many people in the past who wanted to go debt settlement but the numbers didnt make sense so I told them the truth they need to go bankrupt.
NO one is ever happy they have to go bankrupt but they appreciate the honesty, there are so many companies out there that will just sign people up knowing they are going to fall off and need to go bankrupt just so they could make fees. I think that is wrong, you need to be honest with people and let them know what is the best route for them and their family.
I never knew there was so much to know about credit card reduction companies.
Fortunately, I don't need to the service, will bookmark it and pass it on to friends that may need it. Thanks!
debt negotiation and reducing your debt is important in your lifestyle
what a great treasure trove of useful info! so many people think that a bankruptcy will be their instant fix and they're not even remotely prepared for the longterm effects it will cause.
This is a robust page with lots of information. Interesting to think that the way to gain leverage against the CC company is to default on your payments. Although it will effect your credit rating, it is good to know that, if in a bind, one could save 40 to 50% in a settlement.
It looks like the struggling guy who always makes his payments but still owes $20K and the credit card companies raise their rates on them and lower their limit but still needs to keep good credit going for things like a car to go to work or their kids education loans, are stuck.
Broke Dad all the CC companies care about is their profits, nothing else really matters to them. They simply wait for people to run a high enough balance and then hit them with the higher interest rate, knowing at that point the debtor is pretty stuck.
Debt settlement offers people a way out of the mess and yes the initial sacrifice is that the credit score will be affected. However measures can be taken after the debt settlement process is over to repair the credit rating pretty quickly.
But to stay stuck in debt for decades and forfeiting thousands in interest on a yearly basis is financial suicide if you ask me. If you have young children and want to put them through college try looking at if from the angle of saving money to do so, not depending on getting credit. If you get rid of your credit card debt then all that money each month going strait into the creditors greedy pockets can be put towads your childrens education.
Anyway good luck with your situation.
Bocasteve, thank you for this very detailed hub. Your timing is perfect, considering the economic crisis that so many people face. I'm glad you distinguish between when it's best to use credit card consolidation or opt for personal bankruptcy. I also appreciate your feedback to the numerous comments on your hub. It seems that these days so many are in trouble because of greed and a desire to live above their means. Unfortunately, this also includes some of your competitors in the debt consolidation industry who may not be operating with their customer's best interests at heart.
Thanks again.
isnt it better to use debit card than credit card ?
Sure it is always better to use your debit, because that is YOUR money in the bank. But unfortunately most people cant resist the temptation of using the credit cards. If everyone just used their debit cards and got in the habit of not using credit than a lot of people would avoid finanical problems. Our society promotes people into buying things they cannot afford and just charging it on their card. Then they end up paying much more for that item in the long run.
Like the example of implusively buying a new big screen when you see it on sale in the store, when you don't have the money to do so. It might be on sale for $500 but if you charge it to your card you may very well in the long run pay close to $1,000 or more for it. Whereas if you saved the money and just bought it with cash or debit you would not have that problem.
I find it quite interesting how the credit card companies have tailored their offers and interest rates to keep you in debt for decades, if you pay only the minimum each month (and if your balance is rather high).
Everyday I learn something new. Thanks for some insightful information into credit cards.
A credit card reduction service is needed to help people are forced to use credit especially around Christmas time. Credit is such an easy way to buy things you want instead of things you need. Great service!
Credit cards default are at all time high and company like yours surely can help.
Perhaps you can offer some sort of money back guaranteed where people only pay when they get the results.
It will surely speaks volume of your services and showing your confidence in your offer.
Credit cards World, we do offer that if the settlement is 65% or more that there is no fee charged, however the vast majority of our clients save just about 50% of what they owe and that is including the company's fee.
The problem with charging fees after the service is performed is then the issue of collecting them. As you can surely understand the kind of problems that would end up causing, we would end up turning into collectors ourselves at that point. As far as I know our company is one of the only in the business that offers the kind of benefits we do.
Thanks for the comment.
i am on freedom financial debt relief program do you know anything about this company.
ibo I have never heard of them.
Sorry =(
I am sure there are some debt reduction companies that are scams. But for the most part I think they are a service. Of course anyone can do this for themselves by simply communicating with their credit card companies, just some do not want to.
I've seen lots of ads/articles on debt reduction that only emphasize "pay only a fraction of what you owe." This is the first article I've seen that provides a comprehensive, detailed explanation of the entire process, including any negative factors.
Thanks for showing that the debt reduction industry has some people who aren't just in it for a quick buck and customer be damned.
Thanks for sharing Steve, I think the article covers Credit card debt reduction in a positive way and makes the point that it's the big picture you need to consider, exactly how much can the company save you including all costs. It can be easy to get the wool pulled over the eyes when you are in debt, so your advice is good.
Dear Steve:
1 - Great post.
2 - I have c.c. debt; but I am knocking it out, $500 per month at 0% interest (for now). At this rate, it will take me 2 1/2 years to get to zero. Is debt negotiation something I should bother with?
I'm seriously thinking about doing this, but I am in the middle of a 3 year lease on my car, what will this do to me when I have to go in to turn in this lease for a new car? I've never been late on my car payment, but I don't know what affect this will have on them when they run my credit report.
To be honest Queen2002 I cannot give you a definitive answer to that question. It really has to many variables to the situation. There is not doubt your credit will be affected from debt negotiaion. However I do not know whether the leasing company will not give you another lease. It depends on how good of a relationship you have with them, like you said you never have gone late on a car payment but I am not sure how they would act. Maybe you should talk to the car leasing company and let them know your plans see what they say.
Phoney I would not at this point do debt negotiation if I were you. If you can have it all paid off in two and a half years and have the money to make the payments necessary then just keep doing that.
I wish you both the best of luck.
I just read an article today in the paper that has me concerned. It said that out of the money you pay each month to the debt negotiator, they take their full fee out before they even start paying off the credit cards. Meanwhile, the credit card companies keep harrassing and going as far as suing you. Is this true? Do they not pay them ANYTHING until they've taken ALL their money? In my case, that would be a year!
Queen2002 Your comment has 3 points that I hear from people all the time:
Fee Structures:
Each company is different and most companies will collect a portion of the total fee or in some cases the entire amount before ever settling. I have heard of some companies illegally having you use the remaining credit on your credit card to pay their fees upfront! STAY CLEAR OF THIS! You need to understand a well run company does a lot behind the scenes before you start settling your debt. Working with a company that will spread the fee structure over approximately a year and a half or more is a company that has your interest in mind.
Harassment or Lawsuits:
Understand you have the FDCPA (Fair Debt Collections Practices Act) on your side. You can stop harassment, turn the tables on them, and sue them if after you notified them in writing to stop calling. A good debt settlement company will assist with understanding and using the law to your advantage this is a company well worth considering. Lawsuits are not as common as you might think because they are expensive and it doesn’t guarantee they will collect. According to Bank information 33% of people will go bankrupt once sued. Another 50% are in non garnishment States or difficult to enforce collection. This leaves about 16% left that they collect and the vast majority of the time these cases are settled. The question you need to know is what the debt settlement company will do for you if you are sued. Most will do nothing so choosing a company that will pursue settlement is the one to pick. Be sure to find out from any debt settlement company before enrolling with them what their procedure is if you get sued!
Paying Creditors:
A good company should have you on track to start settling by the 7 or 8th month. If it takes over a year than they most likely set your savings amount to low just to make you happy with your monthly pay out. A good company will be upfront and advise you on a shorter time frame which means higher monthly deposits but most companies won’t risk losing you so they will do what you want (meaning give you any payment you will accept just to get on the program like I mentioned above) which is not always in your favor. Choose a company that will review your debt to income ratio and give you the correct timeframe is what you should consider when choosing a company.
I hope that answers some of your questions.
great hub
You have been so much help. I don't like going into things without knowing as much as I can about it. I'd just as soon re-finance my mortgage, but my debt to income ratio is too high...duh..isn't that the reasoon I need to re-finance..but the mortgage companies and banks won't even talk to me... Once the three years is over, and all the cards are paid off, does your credit return to being good instead of bad?
Every day I speak to people just like you. You probably feel like you are being singled out but you’re not!
There are hundreds of thousands of people just like you going through the same thing.
You would think that the Banks would understand that you are trying to reorganize your debt to be more manageable and if they cooperated you would be fine!
I know you made fine this hard to believe but you’re better off that you didn’t re-finance. The statistics show the over 75% of people who re-finance are back to where they were in debt with credit cards within 5 years. The old cliché at the gym is “no pain no gain”! It really applies here too.
I don’t know what your plan is and why you say three years, but keep in mind that your credit score is just a snap shot in time. Your credit history is a movie and it changes as you do positive and negative actions in your financial record. Your credit is never, “ruin” I hear that all too often, “you’re going to ruin your credit”!
Your credit score is mostly determined by your most recent 24 months, so once you get rid of your debt and don’t do anything negative your score will start to rebound on its own. I hope this helps.
Why not just stop paying your credit card bills?In 7 years your report is clear again.
I have so much debt that the debt reduction company I talked to, talked a 3 year plan. I did read that they would take the first 2 months of my payment, then $200 each month after that. And you're right, I have re-financed my house more times then I'd like to admit just for this same reason. But now my house is worth less than what I owe, so that's not an option any more. My biggest fear is to get into this and find out what the catch is too late.
Steve, If I read you right, as long as I stay current...even with minimums...they will not negotiate...correct ?
I live in Texas. Are there any special drawbacks to unsecured debt down here? I am 53 years old....and really need to get my debt gone within 2-3 yrs...Is this really doable?
Sorry I have been very busy I should have responded sooner. Yes you are correct, the only way you get their attention is when you fall behind in your payments.
Texas is like Florida, one of the best States to live in when it comes to being in debt. Both States have a specific laws in place to Declare Homestead Exemption to basically exempt you against creditors like credit card companies from affecting your home. Even if they get a personal judgment against there are Statue's makes it impossible to collect.
Lawsuits are the biggest drawback that scares most people, but lawsuits are not as common as you might think, they are exspensive with no guarentee of collect any money from you. Living in Texas reduces the odds of being sued because it's a non-garnishment State. That doesn't mean they won't, because most people do not know their rights.
To honestly answer you about accomplishing getting out of debt in two years I would need to review your budget to determine if YOU can do it. If your budget warrants it, yes, it can be done in 2 years or less.
Also Texas is a State that is nearly impossible to garnish your assets, so in terms of drawbacks the risk is very low.
Lots of good information. I like it. As my economics professor told me, "There's no such thing as a free lunch"
This sounds like a perfect plan for America right now as so many people are getting into credit card trouble.
Wow, a couple quick comments. You mentioned that you recommend NOT staying current in order to leverage the ability of the reduction company to negotiate on your behalf. How do you justify telling someone NOT TO PAY THEIR DEBTS? You also fail to mention the tax implications of debt forgiveness. Any amount over $600 forgiven by a creditor in a calendar year becomes taxable income to you and can be 1099'd at the end of the year. I am not telling someone that $20,000 in debt is better than $12,000, as long as people understand that they may have taxes to pay on the $8000 the credit card companies "gave back" to you.
It's all about the information. If consumers make an informed decision, I'm okay with that. When they are told, "this won't REALLY affect your credit, just look at all the money you will save (and I will make)" then the industry as a whole suffers. As a mortgage broker, I have used debt negotiators in the past to reduce payoffs on old debts from the proceeds of cash-out refinances, but only with deletion letters to limit the negative credit consequences and , according to the company I used, agreements NOT to have increased tax liabilities.
I didn’t “recommend” in the 4th paragraph to stop paying your creditors but I want anyone who is considering a negotiations process to understand that they will only negotiate when an account is in default. It’s the same with a mortgage if you’re paying on time it’s next to impossible to get the bank to modify your loan unless you are behind.
Thank you for bringing it to my attention, I have edited the paragraph to make it clearer.
As far as taxes, I have been considering adding more info about that question. Your assumption that you WILL pay taxes is incorrect. First only the original creditor is require to file a 1099 a debt buyer is not. This is according to the 2004 IRS publication which I post on the site. Most people do not have the sufficient funds to settle with the original creditor before charge off (180 Days) after their last payment.
So the average person ends up negotiating with a debt buyer, which means they won’t have a tax liability. But even if you do settle with the original credit and receive a 1099 you still will most not likely pay taxes! Because if you are insolvent like 99% of the people who read this and can’t pay their bills you can file the IRS Form 984 which is an exemption to pay taxes on a forgiven debt.
If I understand it correctly your comment about using a debt negotiation company that you have or still use includes that the collector includes a deletion letter for your credit report and that they won’t file a 1099.
Well if they bought the debt and filed a negative on your credit report that is easy for them to remove but they cannot tell the original creditor what to do. That will stay on the report. Also since the debt buyer is not in the business of lending money according to the IRS they don’t file a 1099. So asking them not to is basically a joke because they know that they aren’t required, just read the 2004 IRS report.
As far as taxes go, if you can afford to pay them and you’re not insolvent then you would need to consult a good CPA first to find out how much you will save. If your net settlement saves you at least 50% and you pay taxes you would need to be in a very high tax bracket to not come out ahead.
And from all my years of being in this field I can tell you that high income earners are not reading this blog just to figure out how to reduce their debt amounts. The majority of people who read this are in trouble and need help with getting out of debt.
Hi,
I don;t think that Credit card Reduction Companies are scam. Lets say that among the good and stable companies that have excellent records and really do their job, there are cheaters that only purpouse is to stole your money and hide. I have suffered from such a company, but finaly I found a good one and use it allready 2 years.
Hi,
Thanks for writing this. I worked in the national call center of a huge regional bank that failed and was forced into a sale to a bigger bank by the Treasury Department in January of this year. I was there about a year and a half, and wow, I saw some things that made me sick.
One of those things was exactly what you explain here about debt reduction companies that set clients up on a payment plan the clients really couldn't EVER afford, then seize their accounts when they fall behind. I saw this happen again and again. Same thing with debt collectors, who would set up a re-payment plan in good faith, then as soon as they had the account number on the first check they would clean out the account completely causing multiple overdrafts and fees. I routinely saw people left with hundreds of dollars in fees over this kind of thing, frozen accounts, and no money to deal with any of it. I don't know if these practices are legal, but I can tell you I saw this happen over and over again.
As to advising people not to pay their debts, I personally would advise that for some people. Just stop paying. Yes, it will ruin your credit. Yes debt collectors will call you all day every day. But many credit card companies cherge as much as 33% interest FOR YEARS for a single missed payment, and they shuffle due dates without notice hoping to cause a missed payment. They can charge any interest or any fees they want (since the new law was passed recently they do have to send rate change notices now), so in effect, they can and do just jack people around so they never get a leg up on the true balance owed.
Yes, if you borrow money you should pay it back, but there is such a thing as good faith lending versus predatory lending or usury. When a the customer is acting in good faith and the lender is not, that customer will never pay off those cards--the lender will make sure of it. So I would say, yes, stop paying, and if legal action is taken against you (usually it won't be taken), get an attorney and file bankruptcy if you can. Unsecured debt is just that--unsecured. They can't take your stuff or your house, and most of the time after selling your debt over and over from one collection agency to another, they'll write it off. In most states there is a statute of limitations after which the debt can't be resold to another collector.
Skip the debt collection companies altogether. You can do that yourself if you want to go that way. Nine times out of ten you are just changing one shark for another shark when you sign on with a debt reduction company. It's like when someone is bleeding in the water and all the carnivores come out. If you're bleeding, get out of the water totally---don't get yerself a new carnivore! Go bankrupt, default, or some combination of the two, and realize credit is not for you, not until there are a few laws back in place to protect people from sharks, but maybe not then either. Use cash. Live simply.
Anyway that's my 2 cents for what it's worth. (Probably worth 1 cent now.)
Of course, I'm a big unemployed loser. So what do I know? I'm just telling you what I saw and how I feel about it. Thanks. :)
Good info, BocaSteve. It's a frightening prospect to be out of control in debt and have to put your trust in someone to help get you out of it. Do I have trust issues? You bet!
And PGrundy -- you are certainly NOT a big, unemployed loser! You are a temporarily unfettered, worldly wise woman!
MM--that does sound a bit better! lol!
This is truly useful information and I am certainly tell you numerous people can benefit from it so more people who have massive credit card debt. I believe, it is a time to get the word out about this. Credit card is an easy way to purchase many things you want. Thanks for the information. Good Luck!
Thanks for this great hub, I just think that Credit card is a good way, i like it,
thank u so much again!
Interesting hub - thanks. I'd never considered that the 'pay what you can' schemes were actually doomed to fail. I'd always assumed they were possible due to good negotiation on the part of the settlement firm, but it looks like they're just in it to get paid both ways.
Pretty sad how many debt ridden consumers will be caught up in this - when people face losing their home or car they'll jump at any potential lifeline.
Hopefully informative hubs like this one can raise consumer awareness and help people make correct, informed choices in the current difficult economic climate.
Thanks!
I often see a lot of commercials for companies that try and reduce your credit card debt, so I'm already skeptical about those companies and how they work. There are a lot of pros and cons and things to consider when going this route. Thanks for providing some in-depth info about this whole process.
I do not beleive to such companies. Many friends have been scammed and they have lost a lot of money. So my opinion is clear.
Jessica79,
Sorry to hear that many of your friends have been scammed. I have found that most people who have been scammed didn't do their homework first and checkup on the companies background. That is why I have said it VERY important to check on the company’s record first before signing. I’m really not clear on what your opinion is.
Great information! A few years ago I was in pretty bad debt because of my student loan, I just couldn't get ahead. I wish I could have read this article then! It would have saved me a ton! I didn't do any research, I really hope that people who need it find this article so they won't have to go throught what I did.
This was a great article and did a great job explaining how the debt negotiation works. I found myself in a very bad credit card situation and had to work my way trhough on my own developing an understanding of how it all works.
There is one other alternative that was not mentioned in this article... and that is you can do your own negotiation with the credit card companies...
There is truly nothing magic to the process of learning just how the CC companies go about their rather fixed procedures that span several months with contacting you.
I know the thought of negotiating may sound scary but truly it is not.... you just need to develop your resolve and stay with your story of what happenned and exactly how much you could settle for... whether it be one or more cards.
The thing to keep in mind is that you want to settle all your credit cards.... and not just one or two.
Negotiating yourself is more likely yo work well if in fact you have or could put your hands on say 25% of your balances..... and then use that as your budget to settle... start assuming 20% and then go through the process and you will see how the dialogue of the calls turns towards offering you a settlement... Of course they will start at 65-75% .. but you must know that is only their starting offer...
The process basically works on its own... just stay focused and answer the calls and do not be intimidated.. or allow yourself to be made to feel irresponsible.... Just be professional and when the call is done... just move on to what you were doing.
There are many other aspects I could explain.. but the point iis you CAN do it yourself... and you will save a lot more... like maybe 15-20% depending on what debt settlement company you were to otherwise use.
Good luck,
Charlie Nielson
cenielson@gmail.com
Charles,
The article is about debt settlement companies, I assumed that people understand that they can represent themselves in court instead of hiring a lawyer and save a lot of money. The same holds true with negotiations.
All they need to do is a little study about the rules of procedure and the rules of evidence and there you go ready to do it yourself in court but...
Understand that the average person doesn’t have either what it takes to defend themselves in court or over the phone with a collector. It takes a certain individual to be able to get the job done right.
My hats off to you and you sound like one of those people but in all my years I found that you are an exception not the rule.
If your only reason to do it yourself is to try to save on fees you had better think twice! That mindset holds true for everything from selling your own home to re-wiring your electrical outlets. You had better make sure that you have the time and discipline to follow thru. These companies are ruthless and will trample all over your rights they can make you down right physically sick.
By telling a person it’s not so scary to negotiate is a bit naïve, I have talked to thousands of people that have been lied to and had their bank accounts drained. They had better be scared if they really don’t know what they are doing, these collectors can be very cold and ruthless and that is a fact. Just watch the movie Maxed Out, it’s all about the collections companies. You can watch a 10 minute clip of it on my site.
Perfect article. Many people believed credit cards and all debt issues work somehow like some vending machines or what, you sign it here and there and you are done, if they ask you for something you again sign there and here and no problem at all. unfortunately, the reality is different...
I compare credit cards to a bag of potato chips; I bet you can’t just eat one!
Wow, so much information.This was a great article and did a great job explaining how the debt negotiation works
This is great material! Debt negotiation- I had not idea LOL I'm sending this out to a few people now. Funny we just had this conversation with some friends not a week ago!
thanks for the in depth information - you've cleared up a few arguments I've had :)
Thanks so much for posting this Stephen! This weekend I just met a 25 year old single mom who just lost her job and is 60k in debt due to school. It nearly made me sick to think about how she was going to pay that back. I'm forwarding this article to her, it should give her some hope that there is a way out.
Thanks so much for sharing!
Great Article. Many have gotten into deep trouble racking up credit card debt. There are programs and cards specifically out there for those with bad or poor credit. They should be used responsibly though to help rebuild your credit up. Comparing Credit Cards first whether you have excellent, good or bad credit is the first thing and then it is as simple as applying online. You can to http://www.makingamilliondollars.com/credit-cards/ to compare.
Why not use debit card instead? Credit card companies will just let you indebted all your life.
Great article by the way... at least this will enlighten many of us.
Do they have these companies in the UK
I really enjoyed the article
Great article. These companies do help sometimes. It just depends on which one you're using. You just need to shop around for the right one I suppose...
a very eye opening post.
good post..very informative
Is the Company you work for Financial Solutions? I am still trying to find the right company to work with.
Would it be possible to get a detailed script of what to say and when to say it or how this process is handled? I would like to do this myself but would like a little more information on what to say and when.Thanks
If I have 6 CC do I miss payments on all of them and start the negotaition one at a time or default on the high interest ones first then move the low?
I have never used one and for good reason, you can reduce your credit card debt without using a debt reduction company and save yourself a lot of headaches and money in the process.
You're going to find a lot of great info going through the comments after you read the article.
If you're thinking about negotiating yourself, be careful. And realize that you will probably not save as much money. Debts are often "pooled" in the back end to achieve better reductions as the settlement company has the ability to settle many debts at one time (dozens, hundreds or more) allowing them to negotiate lower settlements.
You will usually experience the hits to your credit are the harshest for the first two years and may ease up after that. But count on your score tanking for the most part initially.
Lastly, if you can afford to pay your bills today settlement if rarely the answer. But if you can't afford your payments, then settlement may be the answer for you. Kudo's to the author for pointing out that sometimes a bankruptcy makes more sense when settlement alone is not going to save you financially.
Good job Steve.
comprehensive and full of information write up.
I agree that one must be very careful with debt negotiation. One can get into all sots of problems.
George
Thanks for writing this article. I knew those companies were too good to be true.
There should be something set in place by the ccc's inorder to reward upstanding accounts or rather people that wish to pay the total amount due but aren't offered any incentive to do so.
I think it would be easier not to make payments let the account fall into collections and seek out a consolidater. How long does an account have to be over due anyway?)
Wouldn't it make sense for a ccc to support people that are making there min payments and wish to pay the total due by cutting them a break and knocking off a few hundred or something to show they appreciate the fact people are forefilling there obligations even though they are struggeling just has hard to do so.
This isn't the case so it would seem to me in these hard economic time's the ccc's are supporting delinquency.
Hello: Nice article, couple of questions, are you part of TASC? DO you start charging your fees before the settlements? in other words, is there any upfront fees?
Debt management companies do not help you to pay off your debt they help you to spread out your debt so that it can be paid off with planning without harming your credit scores.
I've grown extremely tired of the lies these companies have given me. In the beginning I needed help. I actually believed that maybe their program would work. I paid the $1,400 and so found out, I was skinned, like taken the hide of a dead deer. I called the credit card company and told them to stop payment. The idiots continued to call. This group was out of an area of Arizona. It just so happened my best friend and his wife are veteran police Department Supervisors. I asked them to give me the address of the little idiot that would call me us and cuss me out for canceling the credit card payment. I then dropped the bomb on him. I told him I might need to stop by his house, and gave him the address and they types of cars he was driving, so we could sit down and talk this over. He was freaked out and wanted to know how I obtained this information. I told him, the same way he gets all of his data. I asked him if he was going to call me any more? He said, NO!
About three weeks ago, I received a notice on how to reduce my credit card debt. I just lost my job of 24 years, and my world came down on top of me.
I listened to him and asked him what his commission was, he told me 15% My severance package was taxed 20% and now he wanted to add another 15%. I told this jerk, no way. I was not going to give him 15% of what I owe. It went from a free evaluation to 15% cost.
I am in the process of building my case for negations. I have my accounts broke down from 25% to 45% reductions. I know I am current on all my bills, but will not be from April 1st on.
Thanks for the great info. You confirmed what I thought was the truth. Now I just need to continue to believe it will all work out.
My husband became disabled last summer. We had a small business but he is no longer able to do the manual labor. We have sold the business equipment but have about 22,000 in credit card debt which was aquired while he was unable to work. We are nearing 60 years old and have basically everything paid for. He has been approved for SS disability. this pretty well gets us by with living expenses except for the 500 dollar a month payments to the CC. Don't think we can continue this much longer. Should I consider debt settlement or contact the CC for a hardship case or something?
Thanks bocasteve for shedding light on this subject. If more companies would just be upfront and straight about the whole debt settlement/debt elimination process, there wouldn't be such a problem. Unfortunately there is a lot of hype in the market today where many unscrupulous companies could care less about the customer and are just out to make another dollar. I too am an advocate against these scams and have written a Hub about it: http://hubpages.com/hub/credit-card-debt-eliminati
There are all manner of debt reduction places out there, some rogues and some genuine operators. as with all things you really need to look at who you're working with and how reputable they are before making a commitment. There's a good article here: http://www.mortgagelasvegasnevada.com/cash-out-ref on how you can use your mortgage refinance as a cheap debt consolidation loan without having to pay some of the fees that often go along with third party loans.
What do legitimate debt settlement companies do? They represent you to your creditor or collection agency. For a fee, they would negotiate your total balance to more or less half and help you be debt free in less than three years. They know that your collectors would rather settle than have you slap them with a bankruptcy.
How Much Are The Fees? The fees for debt companies are not structured and each company has its own pricing arrangement. Some companies charge a percentage of the total debt. This can range between 15% – 18%. Other companies charge a percentage of the debt savings. This amount, usually 25%, is paid once the settlement has been completed. These companies will receive more money in their commissions if they save you more money. For this reason they are more likely to negotiate a better deal for the debtor. Some companies charge a flat fee as they progress through the debt settlement process. There are also other charges that may creep into the process. Some of these other costs that should be investigated are: · Initial sign up fee · Monthly service charges. Avoid Being Scammed As people struggle with mounting debt there has been an increase in the number of debt settlement companies. Unregulated companies often lure unsuspecting consumers in with unrealistic debt reduction claims. Credit Unions, banks and regulated debt management companies will provide realistic goals and often offer a no obligation, free consultation. · Check with the local Chamber of Commerce. If the company is legitimate it will more than likely be an accredited member of the Chamber of Commerce. · The company should be a member of the International Association of Professional Debt Arbitrators (IAPDA). The company you are considering should have IAPDA certified debt arbitrators. Having certified IAPDA arbitrators means that they posses a foundation of understanding necessary to perform negotiations on your behalf. · It is also recommended that the company be a member of The Association of Settlement Companies. When investigating a debt Settlement Company always use common sense and ask a lot of questions. If you feel pressured or do not like the sounds of the answers then maybe a different company will provide you with the peace of mind you require.
Really, Hat’s off. Well done, as we know that “hard work always pays off”, after a long struggle with sincere effort it’s done. This action proof to be a win, win situation. This is a true art
work, which will be a success story.
===========================================
Credit Card Deals
Really, Hat’s off. Well done, as we know that “hard work always pays off”, after a long struggle with sincere effort it’s done. This action proof to be a win, win situation. This is a true art
work, which will be a success story.
===========================================
Credit Card Deals
Great content. The most important thing is to make sure they're legitimate. Make sure they have a long and good standing with the Better Business Bureau. Debt Free Counselor has had an "A" rating for over 6 years.
Consumer Credit Counseling Service (this name specifically) has been around since the Great Depression, I have heard. My sister has used them twice over the years with managing student loan debts and credit cards. It has not hurt her credit.
Debt settlement, debt negotiation, debt arbitration are different names for the same dog.
Settlement simply destroys you, your credit, your reputation.
Debt collectors will be calling, a lot. They can and will call you, your neighbors and your employer. Yes, there are laws they have to obey. But... they can stay well within the law and make you miserable.
If you really truly don't want to pay your bills, declare bankruptcy. It is the only way to stop all the ugliness in its tracks.
Chapter 13 will be on your credit report for the same 7 years as settlement EXCEPT you will have 7 years of peace. You will have an environment that make recovery and eventual credit improvement.
A chapter 13 bankruptcy is a court ordered repayment plan. The court will set a payment plan at 0% interest at a payment you can afford. That payment may not pay your debt in full, but it will go off your record after 7 years anyway.
Now, if you are current but in trouble and don't want to risk your credit there is another way.
www.debtsynergy.com
A+ BBB rating
10 years at the same address, phone number and URL.
IF you are looking for the easy way out, see and attorney. If you want to pay your bills, but are getting killed by high interest we can help.
, I always read your blogs something everyday because I like your thought and I get many advice after read you article. I tell to my other friends about this site & its’s blog. I hope you will read my this comment and you will remember me. i want you to always make new articles like this.I appreciate this.Thanks a lot.
Hi thanks
debtmanbis,
Well i am bit confuse in settlements of credit and debit cards.
How this company help us to settle the amount even we spent and give us confidence of not getting black listed.
KLJK
Great article! I love reading articles and knowing that people are concerned about scam companies. It's sad to see that more and more banks become corrupt nowadays.
Read more about debt relief grants at http://debtreliefgranthelp.blogspot.com
In July 2009 I contacted Frank Jose with Debt Reduction, Inc. to handle resolving an outstanding debt. I told Frank... (More) In July 2009 I contacted Frank Jose with Debt Reduction, Inc. to handle resolving an outstanding debt. I told Frank I only wanted to do business with them if they could remedy this issue in a matter of not more than 3 months. He stated that they could do this. It was not a problem.
So, they begin taking monthly payments from me via Global Client Solutions. Global Client Solutions also assured me that the 3 month time frame was not unreasonable. I HAVE the money to resolve the issue. Each and every time I would call them to find out the status I was ALWAYS told "there's not enough money in the account". They always wanted more money. I told them I had the money and even made additional payments in good faith to insure them that I had the money. In the Fall of 2009, an offer was put out by the creditor that I asked GCS to act upon. They refused stating there was, yet again, not enough money in the account. I, again, assured them that I HAD/HAVE the funds. They did nothing.
Dec. 2009 the creditor transferred my account to a different collection firm who does not negotiate or speak to third party representatives. I was very upset that the window of opportunity had passed for them to act on what I hired them to do. Their answer was that they were waiting to get more money from me. By this time it sounded like a scam unfolding.
May 6, 2010, I canceled my account with Debt Reduction, Inc. with a gentleman by the name of Fernando. Fernando promptly issued me a check in the amount of $3292.77 and told me that they were keeping the fees of $1284.98 for services. When I asked to speak to the person(s) handling this matter he told he they would call me. He refused to give me a contact name. All this company did was collect my money and never rendered services for which they were hired. According to their contract with me they are supposed to negotiate with creditors on my behalf (which they now cannot do), will use reasonable efforts to settle debt (which they have not done) and time and time again I've asked them to make a settlement offer and they never would.
To date, they say their "review board" will go over the account and they will deem if it is necessary to provide a refund or not. This is extremely unreasonable given the circumstances involved. They did nothing to resolve or negotiate a debt settlement which should not entitle them to fees of any kind. All they did was take money from me.
Reputable debt company with attorney representation. These guys are the only ones I know of that offer full legal representation. legalhelperdebt.com
If One is behind on, say, 4 cards, defaulting and has a large debt amount, say 60K, but one card is current, will the current credit card be turned over when settlement occurs? I am wondering if there is a way to do this but still have a credit card to operate on, or does the debtor need to go strictly to a "cash only" transaction type of lifestyle for a while.
Great article by the way.
The ONLY company you can really trust is a law firm. See my blog regarding that and whether debt, or debtors, suck.
**********
alexgavin111
Debt Advice
Some people are excited to use credit cards because they thought they can buy anything. It's true; through credit cards, it is easier to buy our stuff. But the fact is, if we don't pay our debts on the given dues, it will continue to increase and might lead into bankruptcy. So to be able to avoid this problem, every applicant should understand the rules and services of a credit company.
It is good to see some real information in these companies there. This process is really the person who is already in default or is aware that it's only a matter of time before the default.
I agree that one must be very careful with debt negotiation. This hub is nice for me. I have some blog to share http://thesecuredcreditcards.com/ I think this source can help you.
i went with elite financial solutions. they are rated with the bbb / what does people think of this company
I've never heard such diatribe and twaddle in my life as this blog.
Badly written, misinformed and totally useless.
As a debt collector, I give your article 2 thumbs up. Too many consumers are misinformed by the web and by companies just trying to take their money. I love working with the good companies, though consumers can get the same deals if they are patient and negotiate well. I hate fraudulent companies that take consumers moneys and then they get mad at me, the debt collector, who has the job to collect on a valid debt.
weightlifting 3 years ago
Fantastic, comprehensive information. I've been looking at this type of information in order to inform myself, and have yet to find anything like this. Most sources give you part of the picture. Stephen has attempted to, and done a pretty good job of, painting the whole picture on credit card debt reduction companies and how they SHOULD operate.