I understand the concern over debt settlement, but I hope we're not going to throw the baby out with the bathwater here.
The settlement industry is growing fast, and any time that happens there will be companies that are muscling in to make a quick buck. As just one example, I’ve seen nauseating ads from settlement firms trying to recruit out-of-work mortgage brokers, promising them steep commissions for people they sign up.
When I first heard about debt settlement in the late 1980s (yes, it's been around that long), I thought it was the worst idea I’d ever heard of. But I’ve migrated to a middle ground on this issue. The bad guys need to go, but the good guys need to continue helping consumers. Here’s why:
1. We’re getting deeper and deeper in debt. For many people, that means that credit counseling is simply out of reach. The average credit counseling client has about $25,000 in credit card debt. The average debt settlement client has about $45,000 in credit card debt (according to one of my sources). That’s a big difference – and this difference can make or break the bank in terms of a consumer's ability to repay debt.
2. Bankruptcy is sometimes a good option. I always strongly advise anyone who is considering debt settlement to first talk with a bankruptcy attorney. Find out what your options are. If you can file a straight Chapter 7 bankruptcy, then usually that's your best option. If you can only file Chapter 13, then you have to make a decision whether you want to be under a court-supervised plan for up to five years, or whether settlement can help you get out of debt more quickly and with more flexibility.
3. Creditors aren’t always easy to negotiate with directly. I can’t tell you how many people I’ve talked with who say, “I’ve tried to work with them, but they won’t work with me. They are forcing me to default.” I know a lot of bankruptcy attorneys who will tell you their clients have said the same thing.
Cuomo’s announcement comes the same week that the Fed rebuffed an appeal to immediately stop credit card companies from retroactively raising interest rates on consumers' accounts (the Fed will implement the rules in the future; the new federal law will take effect in July 2010). If rates and payments weren’t so high – and if most lenders were really as eager to work with consumers as the industry claims they are – the debt settlement industry wouldn’t exist.
Here’s another question: Why doesn’t the lending industry support appropriate regulatory standards for debt settlement? The Association of Settlement Companies (TASC – which is pretty organized for a “rogue industry”) has been lobbying for this for some time now. Wouldn’t creditors rather get something from borrowers than end up with nothing if they file for bankruptcy?
Gerri Detweiler– Personal finance author and Credit Advisor for Credit.com, Gerri
contributes budgeting, debt recovery and savings information online.
She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.
Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.
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Obviously with H.R. 2309 in heading for the house and AGs making an aggressive stance toward the industry, regulation is definitley on it’s way. The DS industry can provide a valuable service for debt-ridden Americans if done correctly. I hope you are right about NOT throwing out the baby with the bath water…..
There is good and bad with every situation like stated above, when done right debt settlement works, and is a great program I can guarantee that. One thing to keep in mind is the fact that many consumers put themselves into a position to where they become so financially irresponsible they need someone to help dig them out of the hole they got themselve into, Collectors prey on that and they use it as an advantage to con a average consumer into paying more of the debt to fatten their monthly bonus.Collectors will tell a consumer that he can only settle for 60%, debt settlement done right bases its average from 30% to 40% depending on the consumers credit score and the extensivness of the hardship they are going through. Collectors use dirty tactics telling someone that is struggling making minimum wage that their account is “Pre Legal” which is nonsense because people in that position would not even qualify for a garnishment most of the time. Another situation. Why would a cancer patient that has accrued 100,000 dollars worth of debt because of extensive medical bills want to put themselve into a position to where they have to negotiate directly with their creditors? Do They Have the Time to Do that? No. Simply put they have other things to worry about other then their debt and I dont blame them and thats why debt settlement can change someones life if done right! There is a Pro and a Con in almost any situation in life. Credit Scores might get effected but that really does not matter. Their Credit Score is what gets the consumer in the mess they end up in, Credit Card Consultation negotiates out interest rates, in 4 years your still in debt,We get people out of debt in the long run. Life is to short to have a dirty collector harrass you all day everyday. When Done Right Debt Settlement Works!
The Attorney General of New Jersey is a member of the executive cabinet of the state. The office is an appointed by the Governor of New Jersey and term limited. Under the provisions of the New Jersey State Constitution, the Attorney General serves a concurrent four-year term to the governor. It is fourth in the line of succession after the Speaker of the New Jersey General Assembly and President of the New Jersey Senate. When the first Lieutenant Governor of New Jersey takes office, it will become fifth in line. The Attorney General will also be ineligible to replace a vacated Lieutenant Governor.
Ian Roger