Well… maybe shocking to some.

I do not often post on consults I do. This one from about six weeks ago provides both warning and sound advice.

A gentleman in Indiana called in to the toll free line here at Consumer Recovery Network after hitting our website while researching debt settlement. I answered the call and proceeded down a list of general things I ask during a typical debt consultation.

He had already spoken to a representative of a NY law firm after hearing a radio commercial advertising services to reduce debt. He felt he had a pretty good foundation of what settlement was. As I started to lay out some facts about debt settlement, he started to lay out a little confusion. His confusion is a direct result of things that were not covered in his consult with the representative of the law firm.

The end result of the consult I did was that he now knew about the knock on effects of settlement and that it should only be considered as an alternative to bankruptcy. He recognized he was not close to bankruptcy, but did have a need to get out of debt. During the consult he recognized he could quickly sell 2 cars he was not using for under blue book and pay off his credit cards.

I heard from him the next day.

Being the considerate type, he had called the law firm rep after speaking with me, to inform him he would not need to enroll in his program. The rep (obviously the consummate closer) tried to overcome his objections and continue to sell him on settlement.

He told the rep that he did not want late payments reported on his credit report for the next 7 years. The rep told him “Oh, that’s only for corporations”!

He told the rep that he was not willing to risk being sued. The reps response was “Well… I suppose it could happen, but you would be the first”!

First what? First person the rep lied to that day? This guy exemplifies what is wrong in the industry! He should be answering his telephone with “Thank you for calling the Bib-N-Fib. Can I take your order?”

I could tell my car selling buddy thought I would be shocked to hear that someone was so willing to deceive in order to make a buck. Instead, I shocked him when I informed him it came as no surprise at all. I did tell him that I was highly skeptical that the representative that he was speaking with was an actual employee of the law firm. The rep was likely just a sales guy at a call center where callers from radio and TV ads are funneled, and whose only purpose is to sell callers on settlement so they can get paid a commission. Even if they have to lie, omit or deceive to do it!

I don’t think car guy would have gotten the same nonsense if he called the law firm directly.

The point of this article:

Consumers should only speak to the actual service provider they would work with. Any middle man has one motivation and that is the commission. Some are far more artful in their selling techniques than who car guy talked to (let’s hope most), but why would you need to speak with anyone other than who you are going to work with? You wouldn’t.

If you are looking into bankruptcy and have a consultation (do more than 1), you are speaking to the attorney or an employee of the firm on their direct telephone line or standing in the office.

If you are looking into a debt management plan offered through consumer credit counseling, you are speaking to the counselor or an employee of the agency on their direct telephone line or standing in the office.

Why in the world should you look into a settlement company any other way? You shouldn’t.

There are thousands of places on the internet offering a consultation to see how they can help you get out of debt. There is a daily bombarding of radio and television commercials offering debt help. The vast majority have no direct connection to the company that will actually be providing you a product or service.

If you hear from whom ever you are speaking to that they are going to “refer” you to the best, most reputable this that or the other thing, your talking to a sales guy. He or she gets paid by selling to you and will not be working with you after you start. They often have no accountability to the actual service provider.

ALWAYS start at the source!

I cannot identify one exception to this. Can you?

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How’s that working for ya Mr. Banker?

Credit Card Interest Rates

Currently the cost of money for the banks is next to nothing, but they loan it out charging consumers as much as 30%. That is quite a spread!

The argument I hear for high interest rates is often one of risk. The banks use available data from resources like your credit report which may (or may not) suggest that your behavior reflects a higher risk of default. This risk data is then used, by applying some twisted logic, as justification for increasing your interest rates. Let’s see… some arbitrary or even actual data shows an account holder is at higher risk for not being able to make one of their payments and so the bank’s solution is to increase your rates making your payment higher than those at a lower risk. Gee, that’ll assure timely payment! How’s that working for ya Mr. Banker?

Judging from the increase in bankruptcies, delinquencies and charge offs… Not so much!

Obviously, the current job market is adding to the payment pressure consumers are under, but even those who are employed are often just one interest rate increase away from the edge of a financial cliff. I speak to them daily.

This Bloomberg article from yesterday: A CLUE, shows that some in a position to affect change, via the proposed legislation, actually get it.  It doesn’t take a crystal ball to see that a cap on interest rates will provide for a future where consumers can actually afford to borrow, spend, and successfully pay back their debt, thereby assisting in an economic recovery. There are lawmakers who possess, or are willing to borrow from their constituents, the backbone needed to support a return to sound lending principles.

Yes, I understand that we are approaching an election cycle and perhaps there is a desire by politicians to look good at home, but this legislation has never been more relevant than it is today.

Let’s hope it gets the traction it needs this time!

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FICO Reveals Timely Credit Score Damage Details For the Struggling Consumer

FICO Data Reveals That Settling Your Debts Damages

Your Credit Scores Less Than Filing for Bankruptcy

FICO, the company that calculates consumers’ FICO scores — the scores that are the most widely used by American creditors to determine whether or not they will extend credit to a particular consumer and the terms of that credit — recently released data showing how different negative actions consumers might take in regard to their credit will affect their scores. Among other things, the data shows that settling your debts is far less damaging to your FICO scores than filing for bankruptcy. In other words, the data helps make the case for why settlement rather than bankruptcy is an excellent alternative for many cash-strapped consumers, assuming that they either settle their own debts or work with a reputable settlement firm that charges fairly for its services.

The data released by FICO and available on its web site at:, shows that as a consequence of filing for bankruptcy, consumers may see as much as a 240 point drop in their FICO scores. In contrast, if they settle their debts, their FICO scores may drop by 125 points at most. Interestingly because of the way that FICO scores are calculated, when consumers have higher scores prior to either filing for bankruptcy or settling their debts, their credit scores are harmed more by settlement or bankruptcy than are the scores of consumers who had lower FICO scores to begin with. According to FICO, the reason for this difference is that the scores of lower scoring consumers already reflect their credit missteps.

Despite the FICO data, I must caution you not to base your decision about which debt relief option to pursue based on that information. All debt relief options — credit counseling, settlement and bankruptcy — will have a negative effect on your credit histories and/or FICO scores for some time. (See my recent blog, Debt Relief Options vs. Your Credit Score).

When you are deciding how to deal with your debt, your primary concerns should be gaining a clear understanding of how each option works and its pros and cons, and determining whether the numbers associated with a particular option make sense for you. For example, your first test if you are considering settlement should be whether or not you can accumulate the money you need to fund your creditors’ settlement offers before your risk of being sued by them for what you owe begins to escalate. If you cannot come up with the money you need to settle your debts relatively quickly, then bankruptcy is probably your better option.

For free help determining which debt relief option would work best for you, fill out CRN’s consultation request form.

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Hopeful of Reducing High Interest Rates Results in Lining Scammers Pockets

FTC Sues Three Companies Marketing Bogus Credit Card Rate Reduction Programs to Consumers

The FTC announced this week that it had filed lawsuits against three companies: Economic Relief Technologies LLC, Dynamic Financial Group (U.S.A.) Inc., and JPM Accelerated Services, The lawsuits, which were filed in Florida, Georgia and Ilinois, allege that the companies have been marketing worthless credit card interest rate reduction programs to consumers via automated phone calls, also known as ‘robo” calls. According to the FTC, not only have the companies failed to deliver on their promises, but their calls have violated the federal Telemarketing the Do Not Call Rules.

Telemarketers working for the three companies told consumers who were interested in the program that the program would allow them to save thousands of dollars in interest within a short period of time and would make it possible for them to pay off their debts faster. Consumers were also told that to achieve these benefits they would have to pay as much as $1,495 up-front, but were promised that if they did not save a “guaranteed” amount — usually $2,500 — they could get their up-front payment back. Few consumers ever received a refund however.

Consumers who want to learn more about their rights and responsibilities regarding pre-recorded telemarketing calls, should read the following two FTC alerts: New Rules for Robocalls and Reining in Robocalls, which can be found at

Consumers should know that they have just as much likelihood (if not more) of successfully reducing their interest rates with their creditors on their own rather than by paying someone to attempt to do it for them. If you try it on your own and you hit a brick wall, do not get discouraged. Try again a week or so later and you may have success.

One little tip for those consumers whose high interest rate credit cards may force them to make a payment late: Missing a payment by as a little as a week or two will often give your account a different status that will qualify you for interest rate and minimum payment reductions that were curiously unavailable to you prior to your late payment. However, I must stress that this strategy for getting such reductions is only appropriate for someone who was already unlikely to be able to meet the minimum payment requirement.

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Debt Settlement and the Negative Bias by News Reporters and the Media in General

Main stream media reports about debt settlement and credit card negotiations has been a source of frustration due to how most reports do not cover the process very well for their their readers.

The negative media bias has been a source of frustration for years. The most frustrating part is that the negativity is often correct when applied to the industry as a whole, and when reporting is focused on the numerous bad actors. What would balance things up a bit would be to report on what debt settlement is, how debt negotiation works, and what type of consumer debt situation would likely benefit from using the approach to stave off bankruptcy.

The biggest problem with reporting on debt settlement the concept?

Reporters, more often than not, fail to look deeper and to develop a firm understanding of the concept of debt settlement followed by sharing with their readers some of the predictable things about debt settlement.

With countless consumers struggling to deal with mounting debts and with the consumer bankruptcy rates today, the media is doing consumers a disservice by not providing them with fair and balanced information about debt settlement. By fair and balanced I mean:

• explaining the goal of debt settlement

• detailing when settlement is an appropriate option and how it compares to other debt management options

• educating consumers about how to settle their own debts and the resources available to help them

• Identify traits of a reputable debt settlement service provider

• warning consumers about signs that a debt settlement company is not on the up and up

Sure, there are exceptions, but I’ve found that most media run the other way when it comes to covering debt settlement with any type of depth. They seem completely unwilling to get educated about do-it-yourself settlement options, or about ethical no upfront fee debt settlement companies. There are now, and have been, debt negotiation companies that provide debt-stressed consumers with a valuable service and charge them fairly for the results after they are achieved. Instead, reports either ignore debt settlement, or paint debt settlement company’s with a broad brushstroke, characterizing every firm in the industry as a rip off when another bad actor is called out for having sold debt negotiation to someone who had no business attempting it.

Not only is this characterization unfair to those members of the debt relief industry that truly want to help consumers get out of debt, but it’s also unfair to consumers who are burdened down with debt and looking for a way out.

Credit card debt negotiation has proven to be a workable debt solution for many.

Most media reports scare consumers about settlement, and warn them to steer clear. So, I am issuing the media a challenge: Get informed about debt settlement! Understand how it can (and should) work and who it’s right for, warn consumers about the bad firms, and inform them about the good ones, or at least balance the negative attributes of the process, with the positive. Under the right circumstances debt settlement can be a great option for consumers, and every bit as legitimate an option as debt consolidation, working with a credit counseling agency, or filing for bankruptcy. On this web site you will find a wealth of detailed information about debt settlement, how, when and why it works. You will see clear descriptions about who debt negotiation will work best for.

If any member of the media has any questions about debt settlement, the way an informed individual can use the details provided on this site,  or would like to speak with consumers who have followed the education to a successful end, drop me a line.

If you have questions or concerns and would like to interact anonymously, just post them in a comment reply below. I will be happy to answer any query.

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