Clearly, the biggest surprise in consumer borrowing since the crash has been the explosive expansion of student loan debt. It has surpassed both auto lending and credit card lending. And, since it ties with Payday Lending and pre-crash sub-prime mortgage lending for the thinnest underwriting there are defaults aplenty.
Consumer advocates are rightly urging the Department of Education to provide simpler and clearer paths forward for consumers with student loans in default but many people still need a helper. As defaults in mortgage loans and on credit card loans have fallen, providers who live on the profits of counseling people who default on those loans have turned their attention and their advertising and marketing to consumers who are in trouble on their student
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Tell me the truth. Does this sound legal? Crystal has $12,000 in credit card debt, and ABC Debt Settlement Company advertised that they can settle credit card debts for 50 cents on the dollar. We’ve all heard the ads “Do you have more than $10,000 in credit card debts? Banks got their bailout, now it’s time for yours.”
When Crystal contacts ABC about the program, ABC advises her to stop paying her debts in order to show the credit card companies whose boss. ABC has her sign a $515 a month electronic funds transfer from her bank account. This money will be put into an account to use to settle with her credit cards, but guess what? ABC has no agreements to settle anything with anyone. But they keep collecting the $515 a month.
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