Changes expected in the debt settlement industry

Oh bologna! It is much much better to settle your debts yourself. Most creditors now won't deal with these companies and just automatically sue the debtor once they find out they have hired a ds company. This forum is full of stories of people who paid these ds companies for months or a year and then found out they never even contacted the creditors because they had to get their money first and there is no money put aside to pay the creditors until after that. And then when they get sued the ds company says they can't help them.

Here's another stat. If people settle themselves they can do it in as short as 90 days. but using a ds company it can take years. They are total rip offs except for maybe the ones that just provide advice to you on how you can settle them yourself.

Hi Insider,

You posted a link to the FTC and stated that debt settlement is dead.

It isn't, its just that one of the most pernicious practices by debt settlement companies - well documented to cause harm to consumers on this board - is now dead.

No charging upfront fees for debt relief services starting 10/27/10.

You encourage people go talk to an attorney. I agree with you.

To be clear though, unless the attorney you speak with meets the exemption in the new TSR's, they are also banned from charging upfront fees.

To Be has it right by the way. It is generally much better to settle your debt on your own when you are confident you can do so.


Mileage may vary

How's someone going to payoff 100K debt in 90 days with $2000 extra per month you moron? After the original creditor charges off and sells the debt, how do you know if the debt collector attempting to collect on it is legally allowed to? Do most consumers know how to facilitate a writen agreement to resolve a debt via settlement? Do most consumers know their rights regarding debt and debt collection laws? NO!!!! They need professional help and not from a misinformation forum like this and certainly not you moron. Also, people need to ask questions, do research, and READ AGREEMENTS before signing up for a rip off company. Dahhhhhh. You think if an idiot can't read an simple agreement or do simple research that they will know how to deal with cut throat banks and debt collectors??? How retarded are you?

"To be clear though, unless the attorney you speak with meets the exemption in the new TSR's, they are also banned from charging upfront fees"

Most attorneys with a real practice are exempt. The ones that solely provide ds services are not exempt.

Also, this new law WAS NOT designed to help consumers. It was designed to kill the companies that were taking their money.

I agree with debtinsider, the rule was definitely designed to kill debt settlement companies. Whether that's a good thing or not is a matter of opinion, but the fact is that debt settlement fees are like gym membership fees. Gyms make money on the 90% of people that sign up and never come in the door to use the equipment. If everyone did show up, they couldn't possibly service them all, the stuff would break quickly, etc. The debt settlement companies get fees from the people that save their money, follow the programs and get settlements. But that is nowhere near enough to cover the costs of renting space, hiring the staff, marketing, etc. For that they need the fees from people that sign up, make a few payments, never save a penny and then cry that the company didn't do anything for them. Meanwhile, along comes a rule that says (a) they can only collect fees from the people that actually manage their money well and get and pay settlements (considering the failure to manage it is usually what caused the mess in the first place!) and b) can't collect from them until after the settlements are done. (when they have absolutely NO incentive to pay anyway.) Im sure others will spin it differently, but the end result is that debt settlement companies just lost 1/2 their potential revenue and all of their short-term cash flow. Whether you're running a hardware store or a debt settlement company, you can't survive as a business under those circumstances.

I agree with DTBF.....I was able to settle my husband's debt with some help from family. True, I am very very fortunate to have family who can help, but settlement saved me from BK and I was able to be over and done with it as opposed to BK where I had to worry about losing my home, my car (transportation to my work) and having a public record of BK. I also may be able to dig my way out of this mess sooner than BK after my husband's business went belly up!!! Do it yourself people....I'm here to tell you....If I can do it.....you can do it!!!

DebtInsider: I am proud to be a moron that could settle their debts and avoid being ripped off. As for your statement of how could you settle $100k of debts with $2000/mo in 90 days -- well neither of us can. If you have read through this forum though you will find a lot of people used 401Ks, money from family and friends and from selling items. But you know that.

But the reality that everyone needs to realize is that if you hire a debt company and you have $100k of debt - they of course want to be paid first instead of after they have actually performed any services. Let's say 15% or $15,000!!! so you are going to pay that $2000 for a little more than 7 months before you even start building an account of money to use for settling. So even if the debtor saved up the money themsevles at $2000/mo they would STILL SETTLE 7 MONTHS EARLIER DOING IT THEMSELVES!!

So no matter how you look at it, your example of someone in $100k of debt at the very least could save $15,000 by doing it themselves. That's a lot of money to people in financial distress.

Insider,
You are posting to a forum populated in large part by those going the DIY route. Many people come back and post their success, but you are calling successful posters morons?

You suggest people do research. This site is where many people land who are actively researching their options.

I do agree that there are ample examples of poorly thought out, incomplete or blatantly wrong answers, suggestions and feedback on this forum. Given the volume on this site though, it is a small enough percentage for a public forum.

Definitely,
I would argue that the 50% loss of revenue you mentioned above is in large part representative of consumers who were ill suited for settlement in the first place.

The industry is not dead with these new rules. Many companies will choose to close up, many marketing only companies will certainly close up, many lead generators will move on.

Whats left will be highly scrutinized starting 10/27/10. Those that survive that scrutiny will do well.

My guess is that the industry shrinks by half or more.

To Be,
Your last post makes some great points. Those points will be no less important to consider when companies are charging only fees based on success. Many of the companies that stick around will set fees at 25-35% of savings. Take 50% savings of original balance submitted at the time a consumer enrolls with a settlement company as an aggregate settlement average and you have the same high fees resulting in longer program duration and increased risk of lawsuits that are prevalent now.

One big difference is that consumers will be screened more heavily for suitability. The fee will now have to be based on the difference between the balance of the account at the time it was enrolled into a program and the settlement amount. Added fees and interest cannot be figured into the % of savings fee.

Hopefully companies will not wait 2-3 years to figure out that accepting people into a program they are not well suited to be in could mean working for free, or close to it, in months 24 and beyond.


Mileage may vary