With the numbers of consumers falling behind on their bills continues to grow debt negotiators, who are supposed to help the situation, end up adding causing more problems and increasing debt than offering cost-saving solutions.
Gail Cunningham, a representative for the National Foundation for Credit Counseling in Silver Spring, Maryland put it this way: “There has been significant growth in the debt-settlement industry based on the economic decline.”
She added, “People are financially distressed and when that happens, the unscrupulous among us seem to come out in droves.”
Some lobbying groups estimate that there are probably more than 500,000 customers seeking the services of nearly 1,000 debt-settlement companies.
The concern over the effectiveness of debt settlement companies is far-reaching. New York Attorney General Andrew Cuomo is in the midst of his national investigation of this industry, and brought lawsuits for both fraud and false advertising against two companies.
Most debt-settlement companies will charge fees based on the percentage of your total debt, with rates between 13 to 20%. As a result, alternatives to debt negotiation are becoming more popular.
Both credit-counseling agencies and debt-management plans are great places to start when you want to formulate a viable solution to your debt issues. Credit-counseling agencies provide educational services to teach consumers how to manage their debt effectively. They may also be able to negotiate with creditors to reduce interest rates and late charges, which allow the consumer to repay the balance over an extended period. These options are far more affordable than the typical debt settlement company.
Since there is a stigma currently attached to debt settlement companies, you may have to consider bankruptcy when you cannot afford alternative debt management options via credit counseling services or other third party services. Yet, you may run into trouble here as well. In 2005 legislation, the bankruptcy laws were made more restrictive so it is now more difficult to qualify for filing.
This move has led to the proliferation of third-party providers like debt settlement companies-a move that has produced some unfortunate consequences for consumers who just want out from under their debts.
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