I was recently retained by a client who – like many people struggling nowadays – tried to tackle their mounting financial problems by going to a debt settlement company. I’ve said it once, and I’ll say it again: debt settlement companies are a rip-off. The proof is in how empty my client’s wallet is now, and where my client is now.
Archive for the ‘Debt Settlement or Consolidation’ Category
Debt: The Prices You Pay
Wednesday, August 4th, 2010
Some espouse the belief that if you’re up to your eyeballs in debt, it’s better to eat beans and rice for weeks, months and years until the debt is paid. I won’t mention names. This isn’t about them. While it’s pretty indefensible to live a lifestyle you cannot afford at the expense of creditors, it’s even worse to lead a lifestyle that can be downright counterproductive and harmful when you’re trying to pay your creditors. There’s being “super frugal” and then there is being “stupid frugal.” So today, I want to cover a few things I’ve noticed people doing while they are trying to pay down their debt. I sharing my observations, but I think it’s good if you consider it food for thought.
Now… About Those Secrets that the Credit Card Companies Don’t Want You to Know
Wednesday, June 16th, 2010
You’ve seen the commercials and heard them on the radio: “don’t pay your debt, don’t go into bankruptcy, eliminate your debt!”
Eliminate your debt without bankruptcy? Really? What the hell am I advising my clients then?
So I did some poking around… which is big fancy lawyer talk for “legal research.” And I think I was able to put my finger on what some of these companies are actually selling.
CareOne: What’s Behind Those Commercials?
Thursday, February 18th, 2010
As I was watching the news the other night, I saw this commercial for CareOne Credit. The name rang in my head – and then it hit me: I had recently read about them in a case while doing some research Since the judge’s observations in that case and his comments were stuck in my head – and since I am seeing these commercials more and more - I thought I would share them here.
The Case
In late 2006, Debra Wood was struggling with debt – and after apparently seeing an ad, she contacted CareOne Credit Counseling. When she contacted CareOne, she was referred to Consumer Law Associates, LLC (CLA). CLA then gave her documents to start her into a debt management plan – which would be administered by Ruther and Associates, LLC (RA). They describe themselves as a “national law firm dedicated to consumer debt reduction.” As the facts of this case unfold, you’ll see what that description is inaccurate – at best.
Thinking About a Consult?
Tuesday, July 21st, 2009
Today, as I found myself on the phone repeating myself – a lot. It then occurred to me that I could probably explain how our consult process works here on the website. In other words, how do you get from reading this website and digesting the information to getting some face-time with a lawyer (i.e., me).
Here’s how.
20 Months Too Late
Tuesday, June 23rd, 2009
When a homeowner refinances their mortgage, the lender must give certain notices under the federal Truth in Lending Act, also referred to as TILA. For a number of good reasons, homeowners must be given a notice that informs them of their rights to rescind their mortgage. But what happens if the notice does not strictly comply with what TILA’s requirements? Does any flaw in the notice permit a homeowner to rescind a mortgage? On June 11, the First Circuit Court of Appeals had an opportunity to answer that question.
The case involved a borrower who had been given a copy of a rescission notice at closing. The notice stated:
You are entering into a transaction that will result in a mortgage/lien/security interest on our home. You have a legal right under federal law to cancel this transaction, without cost, within THREE BUSINESS DAYS from whichever of the following events occurs LAST:
(1) The date of the transaction, which is ______; or
(2) The date you receive your Truth in Lending disclosures; or
(3) The date you received this notice of your right to cancel.
The homeowner also received information on how to cancel the transaction (i.e., how and when notices must be sent).
Under the Federal Reserve Board’s regulations, specifically, Regulation Z, when a homeowner rescinds the mortgage, the homeowner is “not …liable for any amount, including any finance charge” and the lender “shall return any money or property that has been given to anyone in connection with the transaction.” Now if the notices the homeowner receives do not comply with TILA, or if the homeowner never received any notices, the homeowner has up to three years to rescind the mortgage, rather than just the three days. Three years versus three days: that can be particularly advantageous to a homeowner seeking to refinance when interest rates are lower, or if a loan that seemed like a good idea at the time has now revealed that it’s really not a good idea at all.
This homeowner argued that he was able to rescind the loan 20 months after closing because the “date of transaction” line in the notice was left blank. However, the date of the transaction was stamped on the upper right hand corner of the notice (although not precisely in the blank line). But that was not the only issue that worked against this homeowner.
The homeowner attended the closing and admitted receiving the notices at the closing. The only possible issue was that the closing occurred on a Saturday, and it might be difficult to determine exactly when the three days expired (i.e., the following Tuesday, Wednesday or Thursday). But the argument here was not over a few days, it was over a few months. This homeowner was effectively arguing a mere technical violation of the notice that the Court found would impose a penalty on the lender while at the same time allow a windfall on the homeowner. For those reasons, the Court found that there was no way the blanks misled the homeowner as to when his rescission rights expired, and his request to rescind was untimely.
What options does this homeowner have? It’s tough to say. The decision does not discuss the homeowner’s income and expenses or whether there is a possibility that the homeowner can benefit from a bankruptcy filing. But remember, if the home is the principal residence, modifying the loan in a bankruptcy will not be possible.
Another Good Reason to Stay Close to Home
Wednesday, May 20th, 2009
One of the best things about summer is the local produce you’re likely to find not just in the supermarket, but on road side stands. While I admit I’m a bit biased, when I was a kid, there was no better place to get tomatoes and sweet corn than the small farms on Aquidneck Island. That’s probably going to tick-off the good folks in Little Compton, but hey, I know what I know. I am sure that I can find a place online that would ship them to me, but it’s not the same as pulling over to the side of the road, smelling the air, and reaching into your pocket for a few bills to get some good stuff. Law firms advertise online, as do credit counselors and so-called debt settlement and consolidation firms…and there are hundreds if not thousands of companies and firms offering assistance to people struggling with debt. Is it a good idea for Massachusetts consumers stay “local” when they are looking for resources to help them deal with their debt? This very question came up today when I was talking with a prospective client.
For a variety of reasons, the family is in a lot of debt and exploring options. There’s bankruptcy (and I can help them with that), and there’s credit counseling (which I can offer a recommendation). There’s also debt consolidation and debt settlement, but ironically, there do not seem to be too many local companies that offer such services. Perhaps it is because those services are usually little more than a scam. Perhaps it’ because it’s been tried
The clients were considering the “Consumer Law Group, PA” located in Florida. I like Florida – I have not been there in years – but it’s a pleasant place to be. And while I like oranges, I don’t feel the need to go to Florida to get them.
Fortunately, the client did some research on this outfit on their own. They learned that the “Consumer Law Group, PA” had only been around since November 2007. They found websites where people had some very unfavorable things to say. More than one person, actually. They also learned that in less than two years period, they earned an exceptionally low BBB rating. That was their wake up call. It dawned on them: “why are we not dealing with a local business who can help us?”
While this is arguably yet another reason to stay clear from any outfit claiming to offer debt consolidation or debt settlement services (which again, are a scam), I think it is also important to consider going with someone local. It doesn’t matter if it is an attorney, a credit counselor or a lender who may be trying to help you refinance…. why go with an out of state outfit state? After all, we are talking about your money, your life, your family and your future.
For those reasons, it’s important to get good help from someone who knows what they are doing. And frankly, if these issues are important enough for you and your family, then you should be able to look that professional square in the eye. That’s hard to do when they are a few states away.
Still Considering Debt Settlement?
Tuesday, May 12th, 2009
In the past, I have written and warned readers here about it. It is simply not all it is cracked up to be. From CBS News/The Early Show:
[C]onsumer advocates warn that a majority of the companies can’t or won’t deliver on their promises to reduce your debt. The National Foundation for Credit Counseling recently explained that, “A settlement company may suggest that you stop paying your creditors and instead begin making deposits into a special third-party account. The settlement company will attempt to negotiate a settlement offer with your creditor once enough money relative to the debt is on deposit. This may take six months or more, although the exact length of time will vary with circumstances. During this time, the balance on your debt can continue to grow if interest and various penalty fees continue to be charged by your creditor. As a result, you may owe more than when you started and your credit may suffer.”
Even worse, there have been many instances where none of this money ever makes it to creditors — the companies simply steal it, Gibbons points out. Plus, a growing number of credit card companies refuse to work with debt settlement groups. Of course, a group probably won’t tell you that until after you’ve paid them.
The President’s “Plan”
Thursday, February 19th, 2009
I am no economist, but there’s something about the President’s mortgage foreclosure rescue plan that just has not been sitting well with me. I have not been able to put my finger on it and do the research to put together a thoughtful article. Fortunately, I can stay focused on my clients and share with you this article from BusinessWeek by Peter Coy and Theo Francis who point out that the plan doesn’t address the danger of negative equity, and that homeowners with negative equity “might just walk away.”
Even for those who want to keep their homes at the moment, reducing monthly payments without addressing negative equity may just postpone the inevitable. “The reality is, people lose jobs, especially in a recession. People get transferred, people have to move at some point,” says Sean O’Toole, founder and CEO of ForeclosureRadar.com, which tracks California foreclosures. “By lowering payments and not principal balance, you’re guaranteeing the extension of this crisis for years to come.”
This is Suze Orman…
Tuesday, February 10th, 2009
Last fall I shared my thoughts about Dave Ramsey. The blog article brought in more comments than I usually get. I’ve had my eye on Suze Orman ever since I happened to catch her CNBC show over the holidays. James Scurlock has written an article over at Slate.com that puts Orman in a new light. Here’s an excerpt:
Although study after study has shown that personal bankruptcies are caused primarily by catastrophic events like divorce, job loss, and, above all, medical bills and that most of us are struggling with a gap between our income growth and the soaring cost of necessities like housing, Suze tends toward psychological causes that invariably blame the victim. Who is struggling these days, according to Suze? “People who grew up without much money and later earn a comfortable living sometimes spend too much to make up for what they didn’t get as children. … People who feel entitled to the good life, or are unconsciously copying a mother or father who lived beyond her or his means. … If you feel the need to impress people with what you have rather than with who you are, you are at high risk for credit card abuse.”
There’s more here. It’s a good read, but prepare your stomach for the shock and awe of what this financial guru thinks of people who struggle with debt while at the same time offering financial advice that makes me cringe.
I’ve had some limited exposure to Orman. I a CNBC show where callers ask for her blessing to buy expensive things: a camera, a trip with family, or in the particular show I watched, running stilts. After a quick drive-buy glance at some financial information, the caller then says “I really want these running stilts.” Then, the caller waits for either the blessing to buy it, or the chastisement for not knowing better to think otherwise.
I read the article, and decided to take a few minutes and spend some time on her website. The one thing that caught my eye was the promo for the Valentines Day CNBC show (9PM and Midnight ET, 2/14/2009) titled: “Marriage & Money.”
On this Valentines Day, the financial pluses to being married. Should a man pay down his fiancée’s Student loans? Viewers ask if they can afford a puppy, a trip to the 2010 Olympics.
Let me first start by saying that if you want to adopt a pet and can handle the responsibility, please do so.
With that said, why does the promo not say this: “Should you pay down your fiancée’s Student loans?” I can guess that the show’s demographic is primarily women. But still…even so, why shouldn’t the same question be posed to both parties who are planning a life together regardless of their gender? Perhaps I’ll have to watch the show to find out. And if I watch the show, I’ll probably have more to write about.
