When asked by a customer about debt relief counseling or services, I always take the time to thoroughly examine and determine exactly what the nature of the person's debt is ... and how severe. Many lenders will do the same, and proceed in assisting those customers tha
t they feel equipped to counsel and assist at no cost to the customer.
I do this to help straighten out debt and benefit credit scores for present customers, and those considering buying in the future or refinancing present loans. I consider it just another way I can benefit my customers and also see it as extension of my personal lending services. When I feel the debt or circumstances are beyond me, I say so and help in finding someone that is best equipped to handle the more critical stages of debt. I will point out, that there are some companies that are more reputable and better capable of offering that assistance. Obtaining THOSE contacts are key to the success of debt elimination.
Big changes came to those companies found within the debt settlement industry yesterday. The Federal Trade Commission placed new restrictions on companies that promise to help consumers pay-down or eliminate their credit card balances and late fees.
These new changes will apply to all debt relief companies selling their services over the phone ... not to those that make first contact in-person or conduct business entirely online. These rulings are much more wide-spread than it would initially appear, as the large percentage of debt settlement companies utilize radio and television marketing to promote their toll-free numbers. That means they are included under these new restrictions.
It's been reported by the Better Business Bureau that over 3,500 complaints have been received regarding these debt settlement companies since the recent recession began. Complaints contained out-and-out fraudulent activities and stories of debt actually accumulating higher as a result of working with these companies. While utilizing these companies services, many customers quit making their payments, which resulted in further debt, additional interest charges, and late fees being assessed. This only exacerbated their credit problems.
Perhaps the best change contained within these new rulings by the Federal Trade Commission, will be that these compani
es can no longer charge their customers an "up-front" fee for services.
Starting on October 27th, 2010, debt settlement companies will only be able to charge their fees AFTER a customer's debt has already been settled, renegotiated ... or at minimum, seen a reduction. Many companies were charging a percentage of the outstanding balance as their company's service fee. For their fee, they were promising to negotiate for reduction or elimination of debts with the customer's creditors.
Some debt settlement companies also demanded that monies be placed aside in accounts. Of course, the settlement company had control over the accounts. This has been ruled out as a result of the new restrictions. From now on, any accounts maintained must be through independent financial institutions and in the customer's name(s). The customer will retain the ability to withdraw the monies at any time ... and free of penalty.
Strict penalties ($16,000 per violation) will apply to for-profit companies that do not abide by these newer, more restrictive rules. Non-profit agencies or companies do not fall under these penalty rulings.
I suggest strongly that you contact me or your own lender, should you wish a credit/debt evaluation ... or recommendation for a debt settlement company. Take the time to thoroughly know and understand what you are facing. Educate yourself to your options and how best to proceed. With the new restrictions going into place on October 27th, you will be better protected and better served if your decision then ultimately includes the services of a debt settlement company.
Gene Mundt, Sr. Vice President
Personal NMLS #216987
The Federal Savings Bank
1823 Centre Point Circle, Naperville, IL 60563
Skype! 630-219-1316
Gene, I think this is great news for the consumer. I have seen too many people go the the Debt Consolidation Companies because they want to help their credit, even when they already have good credit. The Debt Consolidation Companies do NOT tell the consumer that they will not be able to buy a house for at least a year because of their participation with the Debt Consolidation Company.
Gene, it is about time that someone came down HARD on these shysters. So many folks go to them for help, and end up in much worse shape. By the way, I leaned on that "suggest" button for you. Great post...
Damon: I've heard some real horror stories, believe me. I'm hoping that these new rules clean-up some of the problems and help those that truly need it most. I just wish we didn't have to wait until October 27th to see this go into effect. Thanks for the input ...
Karen Anne: Wow .. now I KNOW I'll be featured! People listen when you speak Karen! Thank you much. And, couldn't agree with you more regarding these companies being shysters. Word needs to get out about them so people are more aware. Good to see you ...
Gene
Gene....perhaps things are looking up in some areas in this mess that started 1994 & up to the 2000's. Who thought up the 'genius' concept that a client pays after the job is complete. Gee, sounds a tad like the Private sector work ethic. With all the changes proposed or being put into 'law' it takes a financial mind-expert to traverse those lanes & avenues. Thanks for the post and the points. for what it is worth, I, too have hit the 'gold' button upper right-hand .
Barb
Gene consumers are already in mounting debt and the thought of adding to that debt in ways that these so-called credit counselors have is unbelieveable. It's like beating a man when he's already down.
As always, excellent information for the public to protect them against these unscrupulous companies. I am going to reblog.
Great information, Gene. People who are in serious financial trouble want to believe that someone will help them, and if they are too stressed their rational thinking may be impaired. I am going to reblog. Congratulations on the feature.
It sounds like there are going to be some significant changes in the debt consolidation business.
Hi Gene -- Better late then never. This is long overdue.
Hallelujah!! They folks needing the help are ultimately responsible, but it doesn't make it okay to put them deeper in debt. I'll be sure to pass this information along. Thanks
Gene, as a Debt Consultant and now Social Media and Marketing Manager for one of those "debt settlement" companies I will be blogging on this issue in depth over the next few weeks. This ruling by the FTC cleared out the fly by night companies who only entered the vertical to take advantage of the consumer and left in it's wake strong companies who have the infa-structure and financial backing to cover the substantial up-front costs of enrolling a client in the program. It is good for the consumer on some levels and bad on others. The ruling will limit competition and there are other possibilities that could hurt the consumer who benefits from our help. We still need to ferret out all of the implications of the ruling and as we do that we will discover pros and cons. For companies like mine, who have been helping consumers settle debts for eight years, this is a good thing.
I can tell by the many comments, that the banking industry has done a great job of spreading mis-information about the debt settlement industry. Follow my blog guys....you'll get a clear headed and honest perspective on this issue. I haven't been blogging on debt for a while as we were waiting on this ruling. Now that it's out my fingers can dance across the keyboard again!
Gene--As usual, thisis an excellent and throughly researched post. I have had clients come to me with proposals from the companuies you describe, and I counsel them to think about what they are doing to their credit, and on an riskty basis with unregulated strangers, If anyone is interested in a fiirm I do trust, look into Take Charge America out of Phioeniix Arizona. I have sent many customers there. Their fees are reasonable, and they have been honest with me and my clients.
Gene....thanks for the information. This is something I will put in my arsenal for down the road.
Nice, rarely do I see regulation that I like...
Jason
Good morning Gene,
Excellent information. Jane Peters re-blogged you and I came back in person to tell you this post is fantastic!
Gene, glad there is no upfront fees, it will weed out the scum bags who take advantage of consumers trying to get help.
I hate crooks, especially ones that prey on people who are already in trouble.
Excellent information, Gene... and great news for the consumer. I'm glad these protections were implemented to protect troubled borrowers from predators.
Barb and Sal: Appreciate the thumbs-up! And yes .. you're right. It's a novel concept. Pay for work accomplished. Who knew???
Charita: Yes ... and that's how the people that seek help are treated. Is it any wonder that many do not?
Leslie: Hopefully this provides a clearer path to that help that is needed. Hopelessness is not a good place to be ..
Christine: Sure sounds like it .. and it's about time!
Chris: That is for sure! This makes is so much easier to refer these services. Before ... it was not so easy. Like telling someone to walk into a mine field ...
Roseanne: Someone likened it to kicking someone when they were down. I agree .. and hope that eases some of that stress and lends a helping hand.
Gene
Kate: I will be reading your upcoming articles with great anticipation .. and hoping to learn better and more clearly the pros and cons of this new ruling. As with anything else ... it will have some of each. I look forward to be educated!
Elliott: Thank you so much for your comments! I also appreciate the recommendation. I still think word-of-mouth is the best and most reliable form of marketing. You give us a place to start, for sure ..
Claire: Glad you found it helpful now .. and for the future. Thanks for writing ..
Jason: You have a point!! lol This is one that I hope hold out hopes for ..
Dorie: Thank you for the kind words and making the effort. My thanks to Jane too. She's become a good friend and supporter ..
Missy: I like that part too! Those having debt issues don't need to be worried about scams on top of all their other worries.
Michael: How do they expect people who already have money problems to cough up MORE money .. or even find it? Seems predatory to me ... you're right.
Bill: Maybe slowly but surely strides in the right direction are being made. We can only hope so. Thank you for writing.
Gene
Jane: Simply .. thank you. I appreciate your commenting here ... and re-blogging my efforts. So very appreciated. You are kind and generous.
Gene
Gene:
Thanks for the overview on this new ruling. With 25% of the population with FICO scores under acceptable levels these companies have a large market base and its important that the right regulation control them.
Hi Gene - Way to get the word out! You are providing your client base with a great service. Oregon is actively pursuing debt management companies who are not providing a tangible benefit to the consumer and following the rules. Hope other states do the same thing.
Evelyn: Good point. That's alot of people in need. Hopefully, this provides the help .. and hope .. they so definitely need. Good to see you, Evelyn. Thanks for writing ...
Karen: Thanks for your thumbs up! It means alot. And just so you know ... the email blast to my clients goes out on Monday! Kudos to Oregon on its pro-active stance regarding these companies. I too hope that other states will also step up their efforts ...
Gene
I have heard so many negative stories about debt consolidators and "advisors." It is great that they no longer can charge up front.
Since the vast majority of the companies in this space are bordering on fraud, it is likely a good thing that they are going to have a tougher row to hoe... We'll see what happens. Of course, the flip side is that there were also probably a few good companies that will have a harder time.
Gene: I think it's a good thing that the gov't steps up to help the consumer.
Gene, great blog on this topic, which I have been following with interest. Sorry I didn't get to suggest!
Erica: I've heard them too .. so it's good to also hear that strides are being made to address the problems that exist in these companies. Hopefully the outcome is positive for people utilizing their services.
Lane: A few more hoops may have been created for the honest companies as well ... but I believe they would think it a small price to pay for increased credibility and a more positive perception with the public. In the long run, it will most likely mean more business for them with the new rules in place.
Roland: This is proof that the intervention can be positive. It was past time for more strict rules and regulations to be in place.
Pamela: Thank you! Appreciate the kind words. I thought it good news that needed some spotlight too ..
Hi Gene - Here's my educated response to this post. I'll be adding more on the topic. Thanks for creating a discussion.
The FTC Ruling on Debt Relief Companies May Hurt the Consumer - Not Help
Kate: Thanks for the comment and info .. I'll check it out! Hopefully we keep the debate going ...
Gene