June 8, 2009
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Looking for Debt Settlement; Beware!
The demise.With all the upheaval in the credit card arena, we're hard-pressed to sort it all out. Just in February alone, the credit card "at-risk" defaults shot up another $5 billion. Now, we're looking at $24 and-a-half billion. As if the other three evil forces weren't enough, the credit card lenders are in a panic, as well. Interest rates are soaring to historic levels, as the banks themselves struggle for solvency to avert bankruptcy and government takeovers.
Meanwhile, credit card consumers are also trying to stay solvent but are losing the battle for all these reasons and more. By and large, no one wants bankruptcy. It's this urgency that drives them to trust settlement companies that enables this "middleman" to throw sand in the gears and make things worse. Both the lenders and the consumers lose while the 'settlers' seem to be the only winners for not delivering. Failing to deliver is not all their fault, however. They have long enjoyed cutting deals where the lenders write-off 40% of the debt (even though the consumer's credit rating is shattered for 7 years). Now, the credit card lenders are less and less able to offer these sweet deals to the debt settlers. So, the deal goes sour but the debt settlers still get all their monies.
As in the case of the West Virginia homemaker in part 3, most debt settlers like to take much of their payment in advance and automatically deduct the rest so their customer can't easily stop the process. They give up some of their financial control so the 'settlers' can have their way. When the West Virginia bread-winner was injured and could work no more, the debt settler kept taking their remaining savings to around $4,000 by the end. The credit card account was never paid off. They finally called on the West Virginia Attorney General's office. Norman Googel, assistant attorney general for the state responded to the flood they were part of with "We're being overwhelmed." Through much hard work, they've produced some promising results: Successful Injunctions against 14 debt relief and settlement companies and refunds to 3,443 consumers as a resulting. But, it's like trying to drill a hole in the water...the complaints keep flooding in.