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Debt Settlement Plans: Run as Fast As You Can, Consumers

posted by Nathalie Martin

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.

Crystal starts getting tons of hate mail and calls from collectors but ABC just tells her to sit tight.  "Can’t she see how desperate the banks are getting now?"  She goes to get an auto loan, and is shocked to hear that her credit is completely trashed.  Eventually she gets sued, but ABC says “don’t worry, there is no need to go to court.  Once the suing company gets a judgment against you, they’ll be even more desperate to settle with you.”  Then her wages get garnished and she finally, after paying $6,180 over a whole year, calls and asks to cancel the program and recover what is in the account. No debt has been settled yet.

How much does she get?  Let’s see, that’s $6, 180 she has paid, less the $349 set up fee, less a $24.95 a month administrative fee for 24 months, or $598.80, but all charged up front in advance, a $19.95 monthly maintenance fee for each of the 12 months or $239.40, less a $249 termination fee, and we are at $1,436.20 left in the account.  However, the company then claims that because Crystal chickened out and did not stick to the program, not ABC’s problem or fault,  ABC is still entitled to its agreed-upon 20% fee on the total debt to be settled (which is now $18,000 due to all the late fees, etc.), so that fee is $4,500.  Here you go Crystal, here is what you get back….$243.80..after paying $6,180.

Far fetched?  I wish.  Watch this.
Legal?  If so, why on earth?

 

Comments

Wow. I did an article about the banksters and their own credit liquidation program which might actually work.

http://thecatwhoatechasebank.blogspot.com/2010/10/chase-bank-balance-liquidation-program.html

Consumers have been left to fend for themselves. They are desperate and willing to grasp at any straw, and the con games are stacking up like cordwood, with the only messages from media and politicians being about "deadbeat debtors" who won't "get over it." It should come as no surprise that people are hiding assets and that the black and gray markets are exploding. The attitude on the street is, "We're dealing with gangsters, so we have to be hoods." For an increasing percentage of the population, obeying the law and surviving are in direct conflict. Of all the damage the Great Economic Fraud has inflicted on the US, perhaps the greatest is to the rule of law.

Item: The ABA backs a safe harbor for attorneys to conduct debt settlement practices in the states whose attorneys general have not yet adopted regs to make this practice unfair and deceptive.

That's Bullshit.

Item: The "law firms" that offer these "plans" to consumers pay themselves first and then purport to put the balance of electronic transfers "in escrow."

Utter Bullshit.

That's pretty bad - but not the only problem with these debt settlement outfits.

The other problem is: that $515 a month is going to, and being held by, some fly by night company that may disappear at any moment with your money.

This whole debt settlement industry exists only because the airwaves are saturated by the sleaziest advertising that doesn't involve the claimed enlargement of the male member.

Just do the Chapter 13 bankruptcy, and let someone solvent and regulated by the Justice Department hold your money. Plus, in Chapter 13 you get the automatic stay, so you won't get sued and then garnisheed while some slick talking conman tell you the debt settlment "plan" is working perfectly. (It is working perfectly all right - for them!)

Moreover, when the balance of your debt is wiped out by a Chapter 13 bankruptcy discharge, you won't get socked with the debt forgiveness tax bill you'd get in the unlikely event that the debt settlement these companies promise actually worked. That's the real result of the debt settlement scam-ster's rare success stories: a 1099, because all the debt that was forgiven through the settlement was income to you.

Surprise! For some reason, that fact never gets mentioned in the commercials that talk about freedom and peace of mind and secret government programs.

Or go to a National Foundation for Credit Counseling member agency and work out a plan to pay your debts over time - again, more reliable than some fly by night post office box company holding your money for a year or more.

http://www.nfcc.org/about/index.cfm

Those commercials make me sick. The size of their media buys make it appear as if these companies are well-funded, even if only by money they steal from customers. The problem is the pitch sounds good. They thrive from high levels of consumer stress and the endless amount of FUD related to bankruptcy.

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