This is one of my favourite all time question. For years the Canadian media has been picking up random information on debt settlement companies from our American cousins. While there are tens of thousands of success stories, most of the published stories on debt settlement tend to be negative.
There’s an old saying about not believing everything that you read. I’ve learned first hand over the years that this is true. Here are a couple of examples why:
At the start of 2009 a newspaper called The Toronto Star did a story on me and my company. It was featured on the front page of the business section and was in a positive light. The story generated some good exposure for Total Debt Freedom Inc. and for debt settlement in general. However, some facts I presented to the reporter were taken out of context or maybe he choose to stretch the truth a little to make for a more appealing read. For example, I mentioned that debt can get away from just about anyone and one of our clients was a former Olympian. The final story read that that individual was an Olympic Gold Medalist which wasn’t true. Many reporters tend to be freelance so they are paid to sell a good story; so as a result, it seems stories can and do get hyped up sometimes.
A few months later a negative example appeared on the evening newscast. CTV which is a major Canadian newscast put out a three minute televised story on their “Consumer Alert” segment by reporter and financial writer Pat Foran. He talked about how debt settlement was potentially a scam, and how Marissa Ruiz (the victim) was very disappointed and that consumers should be wary. The story was packaged and presented as Canadian issue, and made viewers believe that Canadians were getting scammed left, right and center. When I researched the names in the story further, it turned out Ruiz was California resident and used an American debt settlement company that had a horrible BBB rating. The incident appeared to be that of one rotten apple in the US debt settlement industry. Apparently the reporter borrowed the story from another press release he found, and packaged it as his own. Why did Pat Foran forget to mention these facts in his broadcast?
The story then wrapped up and interestingly handed off to a company called “Credit Canada” which is a non-profit credit counselling agency in Toronto. After I reviewed the broadcast and made some notes, I emailed Pat Foran and CTV about their televised slam of debt settlement in Canada. I literally corrected 7 very significant points that were not factual. My email was virtually ignored. From a legal perspective there is no remedy available because of free speech; the media seems very immune.
Needless to say, my feelings about the media are somewhat mixed now.
Bankruptcy trustee’s and credit counsellors have all had their say about debt settlement and why they think it’s a scam. Let’s look at their arguments.
Trustee’s tend to argue that all debt settlement fees are collected up front before any work is done and no form of debt relief is ever given to the consumer. That’s not true; in fact settlement fees are collected monthly throughout a 36 month program. And most settlement companies like ours offer a service guarantee that returns any money paid that a settlement was never finalized on. If the client has enrolled for a 36 month plan then the fees are taken monthly and most clients experience their first settlement by around month 5-8. So how is a debt settlement company getting paid in full up front? We actually get paid as settlements are arranged.
A friend of mine is a trustee in Bankruptcy, and a really wonderful guy, what I learned from him is that close to 100% of people going through bankruptcy or a consumer proposal (a form of bankruptcy) are in some state of default with the trustee. What that means is, they haven’t met a major term of the requirements to be discharged from the debt, and apparently a large portion of those people never do.
Guess what else I learned? The trustee actually gets paid before the debtor is ever discharged from what they owe. Isn’t that a classic case of the pot calling the kettle black? The trustee is in fact a court appointed agent to the creditors, so even though you pay the trustee to get you debt free, he is actually looking after the creditor’s best interest first. Not yours.
Here’s an interesting fact about debt settlement and our company I shared with my trustee friend: 70-80% of the people that enrol will complete the program. The look of shock and awe on his face was priceless when I told him that. He thought the completion rate of people seeking debt settlement would be significantly less then his plans.
Non-profit Credit Counsellors are another all time favourite of mine; they are in bed with the banks, media, politicians and other non-profit companies.
My understanding of credit counselling is that more then 60% of all people enrolled will drop out of their debt relief program before it’s completed.
The first thing to understand is that “non-profit” does not mean free, every business needs to earn money to keep its doors open and pay take care of rent and payroll. All that really needs to happen to maintain a non-profit status from the government is that the company needs to meet certain requirements and can’t show a profit at the end of the year. That seems pretty simple and easy to do; all the principals of the company would need to do at the end of the year is bonus out any profits to themselves.
Credit counsellors have somehow managed to get a lot of positive, free and unexplained media exposure that debt settlement doesn’t get because of their non-profit status.
The other day when a local politician appeared on the news to discuss new credit card legislation in Canada; somehow a spokeswoman from non-profit credit counselling, again Credit Canada, was right there beside him. I wonder why I wasn’t invited to speak as a specialist on the new credit card legislation. I mean the non-profit “specialist” who appeared wasn’t even able to calculate simple math in her head, let alone contribute any real dialogue to the discussion.
On several provincial government websites that talk about debt relief options, they all seem to defer to non-profit credit counselling as the answer to all debt problems. This politician and host on TV did the same thing.
Some creditors will actually tell a financially distressed debtor to go and use a non-profit credit counselling company if they are having money issues. Here’s a big question. Why would a creditor only refer the debtor to non-profit credit counselling? You don’t need to look very far for the answer; credit counselling is really a kinder and gentler collection agency for the banks.
This relationship between credit counselling and banks has been criticized for years. Credit counsellors get more money back to the creditors over a longer period of time, plus many get what’s called a “fair share” payment from the banks. So your creditors are actually paying the credit counsellors to collect the debt.
Don’t let the “non-profit” banner fool you, credit counselling is working more for the creditors, then it is for you. Did you know that if you owed $25,000 in credit card debt, it would probably cost you about $29,000 in total over 5 years with credit counselling? With debt settlement your total cost would be around $15,000 over 3 years
The Internet and media is a prime example of unregulated free speech, so it's easy for anyone to post opinions, spread rumours, tell lies, create controversy or even build entire Web sites devoted to whatever topic is desired, usually without any consequence. Unfortunately, this means the Internet and media is a perfect medium of negative "information" about countless number of companies, organizations, and individuals. Even respected, successful, high-profile companies like Toyota, McDonald's and Wal-Mart are targets for negative communications.
Is the information factual? That's something you have to decide, but before you do, be sure you have all the facts and are certain about the accuracy and credibility of the source of any information found on the Internet and media.
It begs the question: Why are the other debt relief programs like bankruptcy and credit counselling feeling so threatened by the growth of the debt settlement industry? Are we really that much better of a debt relief option to their programs? I guess so.
Wednesday, June 10, 2009
Tuesday, April 7, 2009
The 7 Questions You Need to Ask a Debt Settlement Company Before You Sign Up
Having settlements negotiated on your credit card debts requires know-how, patience, persistence and requires a lot of time. Using a good debt settlement company is a great idea if you want it done right.
The total cost of getting your debt settled over 3 years with all fees included should be less then what you owe today. There is however some questions you should ask the debt settlement company before you begin.
What is their better business bureau rating?
Look for a company with an “A” rating with the BBB. It’s a good sign the debt settlement firm have given their clients very little to complain about. Visit the better business bureau’s website and search for the company you are interested in doing business with.
Are they listed with Dun & Bradstreet as part of the web logo program?
It’s a good sign the company is active and not in bankruptcy
Are they a member of the International Association of Professional Debt Arbitrators or IAPDA?
The IAPDA provides useful debt negotiation training to new hires in debt settlement companies. Being a member shows a commitment by the company to training their debt negotiators properly.
Where are they located and licensed to work?
If they are local, why not pay them a visit? A company operating by a PO Box should be avoided. Several American debt settlement companies advertise their services in Canada, and visa versa, but they aren’t familiar with Canadian creditors and collection practices. When seeking Canadian debt settlement help, always deal with company in Canada and is familiar with Canadian creditors.
Is debt settlement their primary line of work?
Some debt settlement service providers have surfaced who have little to no specialization in debt negotiation. Mortgage agents, real estate agents and even bill collectors working from their home all come to mind. All of these people are usually not properly licensed, trained, insured or bonded to negotiate your debt. They are usually just looking for a quick buck. Always deal with a company that just settles debt; “jack of all trades” are usually masters of absolutely nothing.
How long have they been in business?
In debt settlement, having experience matters. Debt settlement is a newer industry and dealing with an experienced company with a proven track record of success is always better. An established company will have relationships and understanding of creditors’ collection and negotiation policies.
Have they fully disclosed the negative aspects of a debt settlement program?
If the negative aspects of debt settlement haven’t been explained fully then that’s a good sign the company is either too new in the industry or a fly-by-night operation. Well run debt settlement companies just don’t talk about benefits; they should talk to you and fully disclose all aspects of the program so you are going through it with your eyes wide open. In particular they should freely talk about these three items:
1) The threat of legal action while in the program
2) Effects of debt settlement on your credit
3) Collection calls cannot be guaranteed to stop
The best indicator of a good company is full and absolute disclosure about the program. If they are not speaking to you in plain English, are evasive or talk in circles, run, do not walk away from these companies.
Debt settlement is a for-profit business model and the company will not be compensated in anyway by your creditors like some credit counselling companies are, so there is a cost involved. But as mentioned before, if you choose the right company, you should get debt free in 3 years for less then what you owe today.
The total cost of getting your debt settled over 3 years with all fees included should be less then what you owe today. There is however some questions you should ask the debt settlement company before you begin.
What is their better business bureau rating?
Look for a company with an “A” rating with the BBB. It’s a good sign the debt settlement firm have given their clients very little to complain about. Visit the better business bureau’s website and search for the company you are interested in doing business with.
Are they listed with Dun & Bradstreet as part of the web logo program?
It’s a good sign the company is active and not in bankruptcy
Are they a member of the International Association of Professional Debt Arbitrators or IAPDA?
The IAPDA provides useful debt negotiation training to new hires in debt settlement companies. Being a member shows a commitment by the company to training their debt negotiators properly.
Where are they located and licensed to work?
If they are local, why not pay them a visit? A company operating by a PO Box should be avoided. Several American debt settlement companies advertise their services in Canada, and visa versa, but they aren’t familiar with Canadian creditors and collection practices. When seeking Canadian debt settlement help, always deal with company in Canada and is familiar with Canadian creditors.
Is debt settlement their primary line of work?
Some debt settlement service providers have surfaced who have little to no specialization in debt negotiation. Mortgage agents, real estate agents and even bill collectors working from their home all come to mind. All of these people are usually not properly licensed, trained, insured or bonded to negotiate your debt. They are usually just looking for a quick buck. Always deal with a company that just settles debt; “jack of all trades” are usually masters of absolutely nothing.
How long have they been in business?
In debt settlement, having experience matters. Debt settlement is a newer industry and dealing with an experienced company with a proven track record of success is always better. An established company will have relationships and understanding of creditors’ collection and negotiation policies.
Have they fully disclosed the negative aspects of a debt settlement program?
If the negative aspects of debt settlement haven’t been explained fully then that’s a good sign the company is either too new in the industry or a fly-by-night operation. Well run debt settlement companies just don’t talk about benefits; they should talk to you and fully disclose all aspects of the program so you are going through it with your eyes wide open. In particular they should freely talk about these three items:
1) The threat of legal action while in the program
2) Effects of debt settlement on your credit
3) Collection calls cannot be guaranteed to stop
The best indicator of a good company is full and absolute disclosure about the program. If they are not speaking to you in plain English, are evasive or talk in circles, run, do not walk away from these companies.
Debt settlement is a for-profit business model and the company will not be compensated in anyway by your creditors like some credit counselling companies are, so there is a cost involved. But as mentioned before, if you choose the right company, you should get debt free in 3 years for less then what you owe today.
Thursday, February 5, 2009
Credit Vs Debt - Can I Get Debt Free Without Ruining My Credit?
If you are drowning in debt, and you are serious about doing something to end your financial problems, then you will need to decide where to focus your efforts.
You should decide, do I want to eliminate my debt or rebuild my credit? For most people with too much debt it's impossible to achieve both at the same time.
The truth of the matter is if you are carrying a lot of debt, and are near, or at your credit limits on your credit cards while only making your minimum payments, then your credit is going nowhere but south. If you don't believe me, then go to your bank and ask for a consolidation loan to pay off your debt. Chances are the answer is, "no".
To put it in a simple way and using $40,000 of various unsecured debts as an example. Ask yourself, would you rather be:
1. Completely debt free in 3 years with bruised credit.
Or
2. Still owe $40,000 in 3 years with well below average credit.
Scenario number 1 illustrates what happens when you successfully complete a debt settlement program, and scenario number 2 reflects what would happen if you tried to continue to make minimum monthly payments or used credit counselling.
The latter would actually make your credit rating even worse then settling your debt. Also in scenario number 2, minimum payers, on average, can expect to take 15-30 years to pay off their credit card debt and end up paying about 3-5 times what they owe today in total due to interest. If left unchecked, that $40,000 in debt could easily take over $125,000 to pay off over a period of 25 years, with no significant improvement in your credit score until it's all paid off.
The problem is the majority of the population would focus on the importance of credit over getting rid of their debt. They don't want to ruin their credit, and that is exactly what keeps people in debt. Which is coincidentally, what generates profits to creditors.
Look at it this way, if your house was burning down, should you really care if the fire department is trampling all over your gardens? No, a garden can very easily be regrown, and so can credit.
What I am trying to demonstrate is credit really isn't that important if you are drowning in debt. It's the welfare of your family that should come first. All that your credit got you in the first place was a bunch of debt. When you have a ton of debt, you can't get new credit anyways. So ask yourself this. If you have all this debt you can't afford, and are going nowhere fast with it. What do you really need credit for right now anyways?
The truth is credit is actually very easy to rebuild once you got rid of your debt. I have personally seen credit scores jump over 100 points a few months after a debt settlement plan is complete. And that can be accelerated even further by using a secured credit card responsibly.
Take a good look at a debt settlement solution if you are serious about eliminating your debt. It's not going to be the right solution for everyone, but it can help you avoid bankruptcy and get debt free fast with less damage to your credit then bankruptcy or credit counselling.
For most people using debt settlement, they should expect to get out of debt in 1-3 years if they follow the program. Even using a 3 year plan as an example, the total cost of the program including all fees and settlements, should be about 30-40% less then what is owed today.
You should decide, do I want to eliminate my debt or rebuild my credit? For most people with too much debt it's impossible to achieve both at the same time.
The truth of the matter is if you are carrying a lot of debt, and are near, or at your credit limits on your credit cards while only making your minimum payments, then your credit is going nowhere but south. If you don't believe me, then go to your bank and ask for a consolidation loan to pay off your debt. Chances are the answer is, "no".
To put it in a simple way and using $40,000 of various unsecured debts as an example. Ask yourself, would you rather be:
1. Completely debt free in 3 years with bruised credit.
Or
2. Still owe $40,000 in 3 years with well below average credit.
Scenario number 1 illustrates what happens when you successfully complete a debt settlement program, and scenario number 2 reflects what would happen if you tried to continue to make minimum monthly payments or used credit counselling.
The latter would actually make your credit rating even worse then settling your debt. Also in scenario number 2, minimum payers, on average, can expect to take 15-30 years to pay off their credit card debt and end up paying about 3-5 times what they owe today in total due to interest. If left unchecked, that $40,000 in debt could easily take over $125,000 to pay off over a period of 25 years, with no significant improvement in your credit score until it's all paid off.
The problem is the majority of the population would focus on the importance of credit over getting rid of their debt. They don't want to ruin their credit, and that is exactly what keeps people in debt. Which is coincidentally, what generates profits to creditors.
Look at it this way, if your house was burning down, should you really care if the fire department is trampling all over your gardens? No, a garden can very easily be regrown, and so can credit.
What I am trying to demonstrate is credit really isn't that important if you are drowning in debt. It's the welfare of your family that should come first. All that your credit got you in the first place was a bunch of debt. When you have a ton of debt, you can't get new credit anyways. So ask yourself this. If you have all this debt you can't afford, and are going nowhere fast with it. What do you really need credit for right now anyways?
The truth is credit is actually very easy to rebuild once you got rid of your debt. I have personally seen credit scores jump over 100 points a few months after a debt settlement plan is complete. And that can be accelerated even further by using a secured credit card responsibly.
Take a good look at a debt settlement solution if you are serious about eliminating your debt. It's not going to be the right solution for everyone, but it can help you avoid bankruptcy and get debt free fast with less damage to your credit then bankruptcy or credit counselling.
For most people using debt settlement, they should expect to get out of debt in 1-3 years if they follow the program. Even using a 3 year plan as an example, the total cost of the program including all fees and settlements, should be about 30-40% less then what is owed today.
Tuesday, January 6, 2009
Help, I Am Being Sued by a Bill Collector!
If I had a dime for every time a bill collector from a collection agency threatened someone in debt with a lawsuit and actually followed through on it, I would probably be an extremely poor man. It's rare for a collection agency to sue people but it is more common for the bill collector to threaten legal action.
However, you should be aware that when you borrow money as a loan or on a credit card you are in an agreement. Creditors use carefully worded contracts so they do not lose their money if you default in your payments. Understand that anytime you are in breach of a contractual arrangement, you are exposing yourself to a lawsuit.
It's because of this fact that bill collectors use their seemingly endless supply of one liner's that end with threats of "legal action".
Below are some reasons why the threat is rarely followed by action:
Suing someone takes time, financial & human resources.
Despite that bill collector going on about being in debt and suing you for being a bad person, it's rarely an emotional decision to sue and more of a business one. Throwing good money after bad in hopes a lawsuit will collect a debt is a colossal waste, if you know you can never do anything with a judgement once you get it.
Supporting documents are required for a lawsuit.
There are situations where actual proof that the debtor owes the debt is somehow unavailable. A judge needs to hang his hat on something when issuing a judgment to a creditor against a debtor, and they want to see proof the debt is owed.
The statute of limitations.
This is a law in place that defines the period within which legal action may be taken. This time frame varies depending on your laws so you would need to check with a licensed professional in your area.
It's far more cost effective for a collection agency to threaten legal action rather then actually spend the human resources, time and money at actually doing it. That's why practically everyone dealing with bill collectors is threatened with a lawsuit at some point in the collection cycle. Collection agencies are masters of empty threats.
Now, don't rest too easy, there are situations where the threat of a lawsuit may be very real. You have to be alert to two points in the collection cycle. The original creditor and the debt buyers.
The collection cycle usually follows this order: Original Creditor --> Collection Agency --> Debt Buyers.
Some original creditors can be litigious. What that means is they are inclined to sue you if they know you have the means to pay the debt and/or you own a home with equity. They may decide to hire a law firm to sue you to secure the debt with a judgement rather then assigning the debt to a collection agency to harass you.
The collection agency is usually (but not always, some creditors skip this step) the second step. The agency is a paid a commission usually ranging from 10-25% of what is collected for the original creditor.
The debt buyers are often the last collection step. It's usually some form of a collection agency that buys debt for a few pennies on the dollar. Because the debt buyer owns the debt, they can do what ever they want with it. I have seen some debt buyers just blindly sue people when there are no assets to satisfy a judgement. It's a really bad business decision but it does happen sometimes. Others won't even spend the time or money, it depends on company policy.
A debt assigned to a collection agency on the other hand is a different story. I would estimate that your chances of actually being sued by a collection agency that has been assigned a debt for collection, is about as good as being struck by a bolt of lightening on relatively clear day. However, it is also fair to say that if you are behind in your payments and owe debt then your chance of being threatened with a lawsuit by bill collectors is nearly as certain as death and taxes.
Debt is tough to deal with; there is no easy way out of it. Seek help if you need it, debt settlement is one of the best alternatives for people dealing with collection agencies because it is fast, effective and has little to no further impact on your credit rating.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 40-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca/
However, you should be aware that when you borrow money as a loan or on a credit card you are in an agreement. Creditors use carefully worded contracts so they do not lose their money if you default in your payments. Understand that anytime you are in breach of a contractual arrangement, you are exposing yourself to a lawsuit.
It's because of this fact that bill collectors use their seemingly endless supply of one liner's that end with threats of "legal action".
Below are some reasons why the threat is rarely followed by action:
Suing someone takes time, financial & human resources.
Despite that bill collector going on about being in debt and suing you for being a bad person, it's rarely an emotional decision to sue and more of a business one. Throwing good money after bad in hopes a lawsuit will collect a debt is a colossal waste, if you know you can never do anything with a judgement once you get it.
Supporting documents are required for a lawsuit.
There are situations where actual proof that the debtor owes the debt is somehow unavailable. A judge needs to hang his hat on something when issuing a judgment to a creditor against a debtor, and they want to see proof the debt is owed.
The statute of limitations.
This is a law in place that defines the period within which legal action may be taken. This time frame varies depending on your laws so you would need to check with a licensed professional in your area.
It's far more cost effective for a collection agency to threaten legal action rather then actually spend the human resources, time and money at actually doing it. That's why practically everyone dealing with bill collectors is threatened with a lawsuit at some point in the collection cycle. Collection agencies are masters of empty threats.
Now, don't rest too easy, there are situations where the threat of a lawsuit may be very real. You have to be alert to two points in the collection cycle. The original creditor and the debt buyers.
The collection cycle usually follows this order: Original Creditor --> Collection Agency --> Debt Buyers.
Some original creditors can be litigious. What that means is they are inclined to sue you if they know you have the means to pay the debt and/or you own a home with equity. They may decide to hire a law firm to sue you to secure the debt with a judgement rather then assigning the debt to a collection agency to harass you.
The collection agency is usually (but not always, some creditors skip this step) the second step. The agency is a paid a commission usually ranging from 10-25% of what is collected for the original creditor.
The debt buyers are often the last collection step. It's usually some form of a collection agency that buys debt for a few pennies on the dollar. Because the debt buyer owns the debt, they can do what ever they want with it. I have seen some debt buyers just blindly sue people when there are no assets to satisfy a judgement. It's a really bad business decision but it does happen sometimes. Others won't even spend the time or money, it depends on company policy.
A debt assigned to a collection agency on the other hand is a different story. I would estimate that your chances of actually being sued by a collection agency that has been assigned a debt for collection, is about as good as being struck by a bolt of lightening on relatively clear day. However, it is also fair to say that if you are behind in your payments and owe debt then your chance of being threatened with a lawsuit by bill collectors is nearly as certain as death and taxes.
Debt is tough to deal with; there is no easy way out of it. Seek help if you need it, debt settlement is one of the best alternatives for people dealing with collection agencies because it is fast, effective and has little to no further impact on your credit rating.
Richard Cooper is Founder & CEO at Total Debt Freedom Inc. Canada's most respected debt settlement company. Total Debt Freedom offers debt settlement plans that can save you 40-70% of what you owe and get you debt free in 1 - 3 years. http://www.totaldebtfreedom.ca/
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