Last week I spoke with someone who told me something surprising. She had hired a debt consolidation company to settle her debts and it had actually settled one. But was it actually worth it for her to hire the debt consolidation company? Keep reading to find out.
Debt
consolidation companies use many tactics to snare their customers,
most of which disregard the truth and target those most in need. An
ad currently playing on the radio asserts that Congress has passed a
stimulus bill which allows people to settle their credit card debt
for pennies on the dollar. This is absolutely false. Congress passed
no such bill. (Of course, people have always been free to try and
negotiate with their credit card companies, so that is true.)
The way the debt consolidation companies work is as follows:
You sign a
long contract with small print agreeing to have a certain amount of
money drawn directly out of your checking account each month. The
company takes this money. It also writes letters to your creditors
telling them that they are interested in settling the debts. This
causes the creditors to send future letters to the company, not you,
giving you the sense that your debts are being handled.
However,
these companies do NOT send any money to your creditors. After 6
months or so, the creditors have not been paid, your credit is ruined
and creditors stop dealing with the consolidation company
and again - look to you for payment.
These
companies routinely get shut down by various state attorney general
offices, but the same people behind the companies simply start new
ones – doing the same rotten things, with a different name. They
are not really interested in settling your debts but in collecting
the money you pay them. Countless
Americans have paid millions of dollars to these companies. It's
unfortunate because these people have the best of intentions.
The FTC is
finally taking some action to help people avoid these companies.
Hopefully, someday, laws will be passed to completely put them out of
business. They are one of the most prevalent scams of our times and
prey on people trying to survive in a tough economy.
Additionally,
don't confuse debt consolidation companies with local consumer
credit counseling or other nonprofit entities that help with debt
issues. These entities can genuinely help people in need.
Then there
is HELPS
nonprofit
which is designed for seniors and disabled persons on Social
Security, disability and protected pensions who do not have
sufficient income to pay their debts. HELPS
gives
these persons peace from harassment and the freedom to use their
income for their needs.
By Rex Daines
By Rex Daines
