Eliminate your unsecured debt sooner than you ever thought possible.
That’s the promise of one debt settlement company.
It’s in their contract, not just their ads. It must be so.
The pitch preys on people’s profound desire to do the right thing. Most people want desperately to pay their debts and avoid the “horror” that is bankruptcy.
After all, the people who sell alternatives to bankruptcy and the creditors all say bankruptcy is horrible.
So let us “help” you, they say. Sign our contract, send us money, and we’ll handle your debts for you.
Well, one such debt relief outfit is learning that selling snake oil may no longer be such a good business.
Debt settlement folks sued
The CFPB has filed suit against American Debt Settlement Solutions and its owner for violation of federal law. Steve Rhode, the “get out of debt guy” thinks debt relief industry had better take notice.
The new law CFPB has invoked addresses abusive financial services provided to consumers. If a service or product takes advantage of the consumer’s lack of knowledge or understanding about the material risks, costs, or conditions of the product or service, it’s prohibited.
That certainly covers this debt relief company: they took an enrollment fee of 15% of the debt involved and charged $99/month for their services.
Only they forgot to tell its clients that it never settled or resolved a single debt for 89% of its clients.
If ADSS was a baseball player, it was batting 110. Not a record that would keep you on many rosters.
I’ll be cheering on the CFPB.
Wrong debts get settled
But, even when debts get resolved by these outfits, too often it’s the wrong debts that are paid.
I saw that recently in a couple who came to me after completing a three year debt management company to resolve their credit card. Why did they need a bankruptcy lawyer?
Turns out, not all the credit cards were included, and they had not paid their taxes or their student loans while feeding the debt management company.
Taxes and student loans aren’t dischargeable in bankruptcy; the credit card debt could have been discharged. They faithfully paid one set of creditors while they dug a deeper hole with creditors who are the Big Dogs in the debt world.
My charge to those in debt? Any debt solution has to deal with the total universe of your debt. It has to have a high probability of success, or it isn’t worth a nickel.
Image courtesy of Artmaker.