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Getting Out Of Debt Shouldn’t Cost A Fortune!

Drop Debt, Surviving Credit Card Hell Without Bankruptcy

Harvey Warren

Rip-off! Scam! Bogus! Predatory! These are the words that the Federal Trade Commission uses to describe the debt settlement industry. Attorneys General in dozens of states are challenging proliferating “debt settlement law firms” where attorneys claim to be safely handling delinquent debt for troubled consumers. In May 2012 the New York City Bar Association released a report titled, “Profiteering from Financial Distress: An Examination of the Debt Settlement Industry”. Simply, consumer protection agencies have intense concerns about companies providing debt help services to desperate consumers who will do anything to stop their collection nightmare. In my book, Drop Debt, Surviving Credit Card Hell Without Bankruptcy, I write about alternative “do it yourself” skills and strategies to help you negotiate with bill collectors and win. With the launch of Drop Debt Coach, I have brought self-managed debt settlement into the Internet new era with videos, audio, text and valuable online resources.

It is not important to engage in the debate about whether the Federal Trade Commission and the newly empowered Consumer Financial Protection Bureau have it right or wrong about the value or villainy of the debt settlement industry. What is important is to understand is that consumers now have effective self-managed options that they can control that take advantage of Internet technologies. As consumers become increasingly savvy about “how to” trade stocks, bank, shop for mortgages and buy insurance online, the reality of a self-managed debt settlement option becomes increasingly more realistic. The Federal Trade Commission encourages consumer responsibility and consumer action on the Money Matters section of its website and has gone so far as to produce public service announcement to encourage consumers to do it yourself.

One of the key concepts in my book and in my statements in the media is, “Your lack of action is a bigger problem than your lack of money”. With an unprecedented number of Americans facing foreclosure, short-selling their homes or struggling with unemployment, a “help based” paradigm shift within the collection industry has begun that makes more credible the notion that consumers really can take action and win self managing their own debt settlements. “Five Tips for Working with a Debt Collector” have been excerpted from Drop Debt, Surviving Credit Card Hell Without Bankruptcy and posted on the Ask Doctor Debt website created by the education foundation of the bill collectors’ trade association. The message from the Association of Credit and Collection Professionals International is clear, if you will just talk to the bill collector who is trying to talk to you, it is possible that some accommodation may be reached. In the alternative, avoiding that conversation will force the creditor to bring you to court.

It is important to note that my posting on Ask Doctor Debt sends a clear message: the collection industry has no organic problem with settling debts. They have real concerns, however, about debt settlement services that insert themselves into the process and diminish collections and recoveries because debt settlement providers charge high fees. Those high debt settlement fees are also a key concern for the consumer protection agencies that oversee the debt settlement service providers.

I have assisted countless consumers in the settlement process and it perplexes me to observe the senseless conflict in the negotiations. Consumers do not want to walk away from their obligations by declaring bankruptcy. Collectors do not want the consumer to walk away from their obligations by declaring bankruptcy. It seemed to me that the two parties in this argument wanted exactly the same thing: to stay out of bankruptcy. Then why is there so much conflict and eventual bankruptcy? I believe the reason is because consumers are afraid of bill collectors and the collection process and are, therefore, unwilling to engage in the discussion. As I noted earlier, the lack of action is really a bigger problem than the lack of money. What Drop Debt endeavors to teach consumers is how to engage in the collection process: tell the facts of your finances and hardship to the bill collector so they can help you arrange a settlement directly with you that doesn’t require the help of a debt settlement provider or a bankruptcy handled by an attorney.

Some debt settlement providers have gotten national recognition for excellent service. I was part of the team that designed the programming for Hope Financial USA. Hope’s program was so effective it was the subject of a positive CBS News report about the “near bankrupt”. Because of the changing regulatory environment, Hope Financial USA has wound down its operations, but many important lessons were learned about assessing a consumer’s debt repayment capacity. Hope Financial USA demonstrated that all debt settlement should be based on what the consumer can pay not what the collector wants to collect. As Capital One likes to ask in their commercials, “What’s in your wallet” should determine what you should pay. This simple reality is often a bitter pill for the collector, but a much sweeter remedy in the end than bankruptcy. Drop Debt urges consumers to make a budget, review their credit report and write a compelling hardship statement that tells why they cannot pay the bill in full. That simple methodology is at the core of every legitimate debt relief plan. Every major collection agency I have worked with is in agreement with this approach.

Competitors in the debt settlement space routinely publish glowing endorsements about themselves and mercilessly attack their competition with anonymity. There is no debt settlement service that is without tar or feathers, including Hope Financial USA. It is impossible for any consumer who is not in the debt settlement industry or working directly for a consumer protection department to know which debt settlement company is a good one and which is a bad one. It is safe to say that any debt settlement operation of any size is going to have unhappy and disappointed customers. The safest debt settlement choice is, therefore, to do it yourself.

Drop Debt, Surviving Credit Card Hell Without BankruptcySelf-managed debt settlement is also the best possible solution for resolving the concerns of consumer protection agencies and consumer advocates. Sadly, doing it yourself is a choice that many fearful and uncertain consumers are reluctant to make. In the alternative, some suggest that legitimate non-profit credit counseling is a better choice and can provide the service and support troubled consumers need. Unfortunately, non-profit credit counseling is reliant on the financial support and good will of the creditors themselves, creating a conflict of interest that the creditor counselors have been unable and unwilling to overcome despite some valiant efforts.

On February 17, 2010, Utah Attorney General Mark Shurtleff announced from the Salt Lake City capital that Utah was going to do something about putting a stop to debt settlement providers that were abusing citizens in Utah. Non-profit credit counseling agency AAA Fair Credit Foundation, with the endorsement of the Utah Attorney General, declared that they were going to lead the credit counseling industry into a new plan for assessing and certifying consumers for less-than-full-balance debt relief to compete with rogue debt settlement companies. The result? Creditors immediately threw red flags and withdrew their financial support and in some cases cut ties with AAA. Observing this outcome, several credit counseling agencies that were preparing to also offer a less-than-full-balance service like AAA immediately abandoned the project. AAA Fair Credit Foundation remains the only non-profit credit counseling agency in the United States ever to try to expand their services to include a less-than-full-balance option. Where does that leave consumers? Simply, on their own. And with proper education, there is no better place for them to be.

Drop Debt was written with the belief and knowledge that debt settlement providers were eventually going to be regulated out of existence and credit counseling agencies were not going to be allowed by creditors to take up the slack. That leaves the debt settlement process right where the creditors and bill collectors want it, in the hands of the inexperienced and fearful debtor. My solution, perhaps the only solution going forward, is to give the consumer a fighting chance with information, skills and tools they need to self-manage their own debt settlement plan. Everything a consumer needs to know about how to prepare a budget, present a hardship and effectively negotiate an affordable settlement is in Drop Debt. For those consumers who want to be “coached” Drop Debt Coach has been created with videos and MP3 files and text to help consumers who would rather watch a topic than read about it.

Bottom line: Self-managed debt settlement may not be the first choice for consumers who are drowning in debt, but it may turn out that the old maxim is true: if you want something done right in debt settlement… you just have to do it yourself.

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