Illinois Attorney General Lisa Madigan explains why consumers need protection from debt settlement scams by comparing them to doctors who make patients sicker rather than returning them to good health. Blogging on the Huffington Post, Ms. Madigan notes that passage of the Illinois Debt Settlement Consumer Protection Act enacts the strongest protection in the U.S. from unethical debt settlement operators. Madigan estimates that 30 to 40 percent of bankruptcy filings occur after consumers have dealt with debt settlement companies. Here’s how debt settlement scams typically work:
- Consumers respond to promises that their credit card debt can be lowered.
- Non-refundable fees are charged up front; these fees can total hundreds to thousands of dollars.
- Consumers are told to stop paying their credit card debt and to send that money to the debt settlement company.
- The debt settlement company sets the money aside in a trust account or escrow account.
- When a sufficient amount of money is accumulated (as determined by the debt settlement company), the debt settlement company attempts to negotiate a settlement with the consumer’s creditors.
Meanwhile, consumers’ credit card debt grows due to late fees and accrued interest, and credit ratings fall due to non-payment. Attorney General Madigan notes that a majority of consumers drop out of these plans and end up having more debt, worse credit, and may also be sued by their creditors. The debt settlement company keeps the money it charged up front and its clients can end up filing bankruptcy.
New Law Limits Up-Front Debt Settlement Fees
The new Illinois law limits the up-front fees that debt settlement companies can charge to $50 and prohibits further payments unless debts are actually settled. Fees are capped at 15 percent of the savings realized from debt settlement. Debt settlement companies can no longer advise clients to stop paying creditors and are required to notify clients that creditors may not agree to reduce balances owed, and that debt settlement plans can negatively impact consumer credit scores.
Following in Illinois’ Footsteps
More states must take a cue from the Illinois law and take steps to shelter vulnerable consumers from scams. If you’re in trouble with debt, facing foreclosure, or both, please contact a certified credit counseling service and/or a HUD approved housing counselor. Legitimate consumer credit counseling and debt consolidation services can help you negotiate affordable payment terms while reducing or eliminating fees and finance charges on credit card debt.
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Loading ...Is Credit Card Debt Keeping You from Getting a Job?
Having too much credit card debt can hurt your job search. That’s because some employers routinely check credit reports during the application process. Even if you are highly qualified for a position, your bad credit could be a huge red flag that leads an employer to offer a job to someone else.
Credit Debt Relief
If you find yourself losing out on jobs because of bad credit, it’s important to put together a debt reduction plan to begin repairing credit. Some options for getting help with debt include: Read the rest of this entry »
(No Ratings Yet) Loading ...Understanding the Difference between Good and Bad Debt
Ideally, freedom from any debt is the way to go, but this is not realistic for most families that want to buy homes, cars, and finance home improvements, college educations, and more. Financial experts often cite consumer debt, including credit card debt and high cost pay day loans, as bad debt. Here’s why.
Good, Bad, and Flat-out Ugly: Know Your Debts
Although recent debt reform may protect you from instantaneous and retroactive rate increases, the new laws do not place caps on interest rates charged by credit card issuers and other finance companies. Credit card debt and interim loans, including overdraft protection arrangements and payday loans, typically charge very high interest rates, and can also have penalty fees that make these debts difficult to pay off.
Debt Management: Which Debt is OK (Maybe)?
For mortgage loans, the interest paid may be tax deductible. In terms of vehicle loans, getting a car loan may make sense if you’re in dire need of new wheels. If you’re trading up to impress yourself, the neighbors, or anyone else, going into debt on a car loan is questionable, especially if you have credit card debt. Before buying your next vehicle, make a plan to pay off credit card debt and contribute to emergency savings. This provides financial flexibility and, should trouble come your way, can keep the repo man away.
In addition to mortgages and the occasional vehicle loan, education loans can also make sense; going to school is an investment in your future earning ability. Federal Direct and FFELP student loans can help you achieve your educational goals without tapping home equity. Your school’s financial aid department can help determine which student loan programs best meet your needs. Federal Direct or guaranteed education loans are not usually eligible for discharge under bankruptcy law; borrowing only what you need can help avoid problems later.
Consumer Credit Counseling Services and Debt Consolidation
If you need to fix a hole in your wallet due to overspending and/or incurring too much debt, consumer credit counseling services can help. They can help you work out a budget for going forward, and can also negotiate affordable payment terms with your creditors. According to the National Foundation for Credit Counseling, credit counseling services typically do not negotiate reductions in credit card balances, they can help reduce interest and other finance charges that make it difficult to pay off your credit card debt.
(No Ratings Yet) Loading ...Can I Go to Jail for Credit Card Debt?
Even if you have thousands of dollars in credit card debt you can’t go to jail for not paying it. But not paying off credit card debt can get you in other kinds of financial hot water.
Harassment from Debt Collectors
It’s best to get help with debt before accounts are turned over to a debt collector. Because once your credit card debt goes into collections, expect to be harassed. Although it’s illegal, debt collectors may use intimidation or even threats to try and get you to pay up. Read the rest of this entry »
(No Ratings Yet) Loading ...Check Your Credit Report
You’ve probably seen advertisements offering free credit reports. Only one Web site, annualcreditreport.com, is actually authorized by the federal government to offer free annual reports from the three major credit bureaus. Getting a report from another site could take a bite out of your wallet.
Getting a Free Credit Report
Annualcreditreport.com offers a free report every 12 months from Equifax, TransUnion, and Experian. If you check your credit report more often than that you must pay a fee unless you:
- Have been denied credit
- Have been the victim of identity theft
- Been denied employment because of your credit
- Are unemployed and plan to look for a job within 60 days Read the rest of this entry »
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4 Tips to Avoid Holiday Credit Card Debt
For someone struggling with credit card debt, Black Friday can be a scary prospect. Everywhere you look retailers and other businesses are urging you to shop ’til you drop.
People who are looking for credit debt relief should definitely avoid using plastic if they venture anywhere near a store the day after Thanksgiving and throughout the holiday season. Here are four tips to avoid the debt trap.
- Stay home. Really. Find some games to play with the kids, do chores, or rent movies (for free at the library of course). Just do whatever you can to avoid going anywhere near a retail establishment. Yes, there are bargains to be found on Black Friday, but it’s not like there won’t be other discounts throughout the holiday shopping season.
- Use layaway plans. Your may have done this when you were a kid. Though they disappeared for awhile, many retailers have resurrected layaway plans that allow you to choose the items you want and pay for them over several weeks. Use cash instead of a credit card to pay for the goods to avoid taking on debt.
- Use a debt calculator. Do this before heading out to shop to see where you stand. Crunching the numbers to get a clear picture of how much you currently owe and how long it may take to pay it off may be just the thing to keep you out of the mall.
- Make an appointment with a debt counseling firm. A qualified debt counselor can help you work on some of the underlying issues that may push you to spend. Credit counseling also involves working on a budget that fits your current income so you won’t rely on credit cards.
Be smart this holiday season. Don’t feel obligated to make a lot of purchases you really can’t afford.
(No Ratings Yet) Loading ...Bankruptcy Has Repercussions for Years
Filing for bankruptcy should only be used as a last resort if you can’t dig your way out of debt. Don’t be fooled into thinking that a bankruptcy filing has little impact on your financial situation. Going this route is certain to affect your entire life for years to come.
Pushed into Bankruptcy
There are many reasons people resort to bankruptcy. Too much credit card debt, a job loss, divorce, or illness can push anyone into financial ruin. For example, a recent Families USA report said nearly two-thirds of bankruptcy filings are related to medical issues. Read the rest of this entry »
(No Ratings Yet) Loading ...Banks Continue to Tighten Credit Standards
The New York Times recently reported on the results of the quarterly Federal Reserve bank study that takes a look at current lending practices.
“Besides the nearly 60 percent of banks tightening standards on credit card debt, 65 percent said they had tightened lending standards for other types of consumer loans over the last three months.
About 20 percent of the domestic banks reported cutting limits for existing credit card accounts held by prime, or strong credit, customers. Credit card lenders have been reducing customers’ credit lines, raising interest rates or even closing accounts as they tighten the reins to reduce their risk.”
This is not good news for those consumers looking for options to reduce or eliminate their consumer debt through a debt consolidation loan.
(3 votes, average: 5 out of 5) Loading ...FTC Cracks Down on 33 Credit Repair Companies
Last week the FTC announced an effort to shut down 33 credit repair operations with the assistance of 24 state agencies. According to the FTC Release:
“In response to thousands of complaints from consumers throughout the nation, the FTC launched ‘Operation Clean Sweep’ with 24 state agencies in 22 states. In the cases announced today, the Commission charged seven operations with violating the FTC Act and the Credit Repair Organizations Act (CROA) by making false and misleading statements, such as claiming they can substantially improve consumers’ credit reports by removing accurate, negative information from their credit reports. The agency also alleged that the defendants violated the CROA by charging an advance fee for credit repair services. The 26 state actions include alleged violations of state laws and the CROA.”
Many consumers faced with overwhelming debt often consider the credit score consequences of the various debt settlement strategies available to them. If already behind on payments, you may have even looked into possible credit repair solutions.
(3 votes, average: 5 out of 5) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
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Cost of Bankruptcy Has Risen Since 2005 Reform
Understanding consumer debt: The good, the necessary, and the ...
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
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