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May 10, 2010

Democrats Pushing Debt Settlement Bill

Author: admin - Categories: Consumer Debt News, Credit Card Debt Articles, Debt Relief Tips, Debt Settlement News - Tags:

Last week, Democrat Senators Chuck Schumer, D-N.Y. and Claire McCaskill, D-Mo., introduced the “Debt Settlement Consumer Protection Act.” This debt relief bill would limit the fees that a debt settlement company would be able to charge a consumer for debt settlement services. If passed, the new law would mandate written disclosures before debt reduction services were performed and include a provision for the right to cancel for a full refund. These new laws are intended to impact debt service like subprime loans have been impacted by the Dodd-Frank Bill.

According to a press release from the Council of Better Business Bureaus, BBBs across the nation have received more than 3,500 complaints about debt settlement companies since the beginning of the recession in 2007.  Many consumers complained that the debt settlement programs did not work.  Some people even accused the debt settlement companies of increasing their debt.  Credit card debt settlement can leave consumers liable for a lawsuit from a credit card company, in addition to having wages garnished.

A number of consumers who quit the program say they were not refunded for payments they had made.  The debt settlement bill comes after a hearing last week during which the U.S. Government Accountability Office testified about the results of a covert investigation into the debt settlement industry’s practices. It found that most companies it mystery shopped charged an upfront fee before any services were performed, and nearly all of them told the undercover callers to stop paying their creditors. In some cases, a consumer’s payments into the program would go entirely toward fees for up to four months.  Certainly debt settlement can be a successful financial tool for consumers to get out of debt, but it should be a last resort. The FTC explains the pros and cons of various debt relief options in this fact sheet, “Knee Deep in Debt.”

The Better Business Bureau warns of the following red flags for unscrupulous debt settlement companies:  High upfront fees.

  • Guarantees of debt reduction by specific amounts.
  • Claims that the process will be swift or easy.

The original article was written by Leslie McFadden for Bankrate.com

Tighter Rules Coming for Debt Settlement Companies

Author: admin - Categories: Credit Card Debt Articles, Debt Settlement News, credit counseling, debt relief - Tags: ,

Last week TASC reported that the debt settlement industry was under attack as credit card companies may be misleading the government once again.  Debt settlement companies that charge high fees and mislead consumers would be more tightly regulated under new legislation introduced Wednesday.  TASC agrees that debt settlement companies need to be held accountable for their actions but much of this debt relief reform appears to be biased and many incidents are taken out of context.  The proposed law, put forward by Sens. Charles E. Schumer, D-N.Y., and Claire McCaskill, D-Mo., comes as complaints about the debt settlement industry have soared amid the economic downturn.

Under the legislation, debt settlement companies wouldn’t be able to collect fees until a settlement was reached. Consumers also would get clearer upfront disclosures, including a detailed list of all costs and promised services.  Typically, the settlement firms promise to negotiate with credit card companies to reduce the amount that consumers owe. Costs vary, but a company might charge up to 20% of the total debt. Fees are usually demanded upfront, even though a settlement may never be secured

Hiring a debt settlement company doesn’t stop the collection calls either. Interest and financing charges continue racking up too, and lenders may even decide to sue in the meantime.  Consumer groups note that individuals can negotiate directly with lenders, and that credit card companies often refuse to negotiate with debt settlement companies. Even if a debt negotiation is reached — either independently or through a third party it could hinder the consumer’s credit score. (so do bankruptcy, consumer credit counseling and debt management)  Under the Schumer-McCaskill bill, consumers would have the right to cancel a debt settlement agreement and get a full refund. The legislation would provide for enforcement through state attorneys general and the Federal Trade Commission. The federal agency also would be given authority to regulate the industry’s advertising and marketing practices.

Is Debt Settlement the Best Option For You?

Author: admin - Categories: Credit Card Debt Articles, Debt Relief Tips, Debt Settlement News, Featured Debt Articles, debt relief

Like take a loan out to consolidate debt, debt settlement is not something you want to just jump into.  Consider your debt relief solutions and tax implications before signing an agreement with a debt settlement company.

1. First, determine how much debt you have(specifically unsecured debt no including student loans) Request a copy of your credit report from one of the main credit reporting agencies. You could view your credit report with a credit repository company like Trans Union, Experian or Equifax.

2. Have you spoken to a debt settlement company about qualifying?  In most cases, debt settlement companies only work with people who owe more than $7,500. There may be other requirements as well. Read through the information provided by the debt settlement company. Make sure you meet all the requirements.

3. Determine if you have the money for debt settlement. Subtract from your monthly income your normal living expenses, including housing, transportation, utilities, food, and insurance. If you have money left over, then debt settlement may be right for you. If you don’t, you should not try credit card debt settlement.

4. Search for a debt settlement company. Don’t sign with the first company you find. Instead, read through what services they provide and what they expect from you. Look for debt relief companies that have been in business for a while. Make sure the debt settlement companies you are working with have been approved by the Better Business Bureau.

5. Decide if debt settlement is the best option for you. With debt settlement, you can reduce the total amount you owe and improve the relationship between you and your creditors. Also, you can pay your debt quicker as long as you remain faithful to the credit card settlement offer.

Debt settlement can also incur potential tax problems, and may hurt your credit rating. It may encourage your creditors to initiate law suits against you. Also, it could increase the frequency of calls to you by your creditors.  Read more at http://www.ehow.com/how_2002294_compare-consolidation-settlement.html