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Peddling Relief, Firms Put Debtors in Deeper Hole

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posted on Jun, 19 2010 @ 04:55 PM

PALM BEACH, Fla. — For the companies that promise relief to Americans confronting swelling credit card balances, these are days of lucrative opportunity.So lucrative, that an industry trade association, the United States Organizations for Bankruptcy Alternatives, recently convened here, in the oceanfront confines of the Four Seasons Resort, to forge deals and plot strategy.

At a well-lubricated evening reception, a steel drum band played Bob Marley songs as hostesses in skimpy dresses draped leis around the necks of arriving entrepreneurs, some with deep tans.

The debt settlement industry can afford some extravagance. The long recession has delivered an abundance of customers — debt-saturated Americans, suffering lost jobs and income, sliding toward bankruptcy. The settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customer’s debt is actually reduced.

State attorneys general from New York to California and consumer watchdogs like the Better Business Bureau say the industry’s proceeds come at the direct expense of financially troubled Americans who are being fleeced of their last dollars with dubious promises.

Please visit the link provided for the complete story.

Consumer credit counseling sounds like such a good idea. If you are saddled with a large debt, especially credit card debt, but want to remain responsible and eventually pay off what you owe, these companies promise to negotiate lower monthly payments and/or get other concessions from your creditors to make it easier for you to meet your monthly obligations.

This article primarily concerns those companies that operate on a profit-making basis. But I have known about non-profit consumer counseling agencies that are no more effective in reducing their clients' debt.

These companies promise to negotiate lower monthly payments but often can't or don't. Meantime, even if the client is making the same monthly payments as before, their credit rating plummets just as a result of enlisting a third party to help them. The creditors involved refuse to issue any further credit, of course, and no other source will even consider their client for future loans or payment plans.

And all the while, these vultures are charging their victims hefty fees whether they succeed in reducing their debt or not. The customers of these unscrupulous companies end up in just as bad a situation -- maybe worse -- as they would have if they simply went bankrupt in the first place.

In recent years, many Americans have lived beyond their means through borrowing and accumulating ever more debt. It has taken a deep recession to bring us to the sober realization that nobody can live this way forever. Sooner or later you have to pay the piper.

There are always predators who will profit from the misery, and perhaps the foolishness, of their prey. But that doesn't mean they're not still living off the financially dead.

[edit on 19-6-2010 by Sestias]

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