Often a Substantial Portion of the First Payments Goes to Fees, Not to Creditors- The debt settlement companies often don't tell their customers that a substantial portion of the money that the consumers pay, first goes in to the companies pockets as their fees, not to the creditors. A close counseling tells that the consumers have come up with this view. They had paid monthly payments for several months and nothing happened. The creditors never stopped calling and no money was being paid to creditors, and when they were asked as to where the money went, they learned that it was being applied to the fees. They consumers often withdrew from the program there and then.
In these programs the consumers stopped making their payments to their creditors. Obviously, the creditors begin to pursue the consumers. Many of the consumer's rights under state and federal law come to play. For example, the Fair Debt Collection Practices Act (FDCPA) where applicable, governs what debt collectors can or can not do. Some companies take various steps to retaliate from any such practices of harassing the customers.
Part of providing quality services to people in financial distress, is being able to provide real protection from the creditor. Debt settlement companies just can't offer this service. Advising people to stop paying their bills, and then telling them that they're on their own when the debt collectors come calling, is not the right thing to do and is also a part of breaking the existing laws.
The consumer gets to pay exorbitant fees and monthly payments. He gets little or no disclosures. He gets little or nothing in the way of professional services. He has virtually no ability to cancel the agreement even though he feels that things are not happening on the right track. His debts get bigger and bigger as they amass more interest and late charges which gets on piling off every other day. He's then sent legal summons from the court, including litigation, judgments, and garnishment of wages. The credit history is trashed. And at the end of the day, he gets a bill from the IRS for tax liability.
Many of these settlement companies claim that they have some special relationship with the creditors. What they don't tell you, however, is that some creditors refuse to work with them. Bank of America, Discover and American Express each has a policy of refusing to negotiate with any debt settlement companies. The customer on the other hand feels that the negotiators have a very good rapport with the creditors and will easily work and make things go on the right track.
Many Companies Are Breaking Existing Laws: The Law Center Study has found that -one of the most troubling sides to this industry is that many companies violate state and federal consumer protection laws.- This can be a reason as to why drastic steps are applied on the contrary.
Many consumers who get sold on these programs doesn't know that they could be sued, that their credit report is on the verge of getting damaged and that the amount of the debt would increase with every passing day. When the process server comes knocking at the door, the only thing these companies often say is that there is nothing that they can do to save the customers against litigation.
Professional credit counselors and attorneys working with the somekeyword companies have been around for a very long time. They are trained and licensed. The people speaks to anyone over the phone are not trained professionals, they are just telemarketers! If proper counseling is required during financial crisis one needs to sit and discuss face to face, with an experienced professional, not some salesman from a distant state.
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