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Christine Baker



Consumer Credit Counseling - Debt Negotiators

Paying off your debts will most likely NOT save your credit rating
Why repay $20K or $40K over 3 or 4 years to then have awful credit?
The scanned Equifax credit report
Summary - Morality & Ethics

You've watched the TV commercials, heard the radio ads, saw the web banners and SPAM in your e-mail:

    "LOWER your interest rates and payments!"

    "Combine your bills into ONE LOW monthly payment!"

    "We can eliminate up to 60% of your debt through negotiations!"

Who are those outfits and WHAT will you get?

They promise to reduce your debts and payments, often hyping their non profit status.  The non profits are usually funded by the finance industry, the goal is to reduce bankruptcies. Creditors don't want the debts discharged, they rather forgive some interest and fees and collect whatever they can.

I also reviewed some of the contracts for debt negotiators and I was appalled by the outrageous fees charged to the people who would often qualify to discharge their entire unsecured debt through bankruptcy for just a few hundred dollars.

November 4, 2001 Washington Post article:

Easing the Credit Crunch?
AmeriDebt Is One of a Breed Of New Debt-Counseling Firms Whose Business Practices Are Drawing Regulators' Attention

"When his creditors didn't receive that month's payments, Reed said, he was charged late fees, over-the-limit penalties and higher interest rates. "My credit had been absolutely spotless, but now it's ruined," he said."

Paying off your debts will most likely NOT save your credit rating

Bankruptcy is often referred to as the "10 year mistake" by many of these debt negotiating and credit counseling companies.  

Of course bankruptcy lowers your credit scores significantly for a few years. However, the credit counseling notation found on many credit reports for people who thought they were doing the "right thing" by paying back almost their entire debt can be worse than the bankruptcy.

Some people are lucky and those notations go away once the accounts are paid off. Unfortunately you can also end up with credit such as the scanned Equifax report below:

  • "Consumer Credit Counseling" -- rated similar to bankruptcy
  • "30 (or 60) days past due x times" -- LATE payments, while the consumer made EVERY payment on time
  • "Pays 61-90 days" -- while the consumer made EVERY payment on time
  • "Account closed by credit grantor" - often consumers have to close all accounts when entering the program

FACT:  Your credit rating is most likely BETTER 2 years after discharging your debts than 3 years after entering a payment plan.

Yes, there WILL be creditors who won't offer you credit with a bankruptcy, even after several years.  BUT, why would you need that credit?

Why would you even WANT a Home Depot charge card with a 20% interest rate when you have $$$$$ in the bank?  Remember that when you discharge your debts, you then can start SAVING your money.

So, BEFORE you enter a repayment plan, you MUST get in writing that NO derogatory data will be placed on your credit reports as long as you make your payments on time. Should you find a company who is willing to do that, PLEASE post in the forum or fax that statement to me at (571) 222-1000.

Why repay $20K or $40K over 3 or 4 years to then have awful credit?

Recommended reading at the forum:

Discussions on consumer credit counseling and debt negotiators - the pros and cons:

The scanned Equifax credit report

Unfortunately this is the scan of a fax, but I'm sure you can see the important highlighted DEROGATORY notations.  Why Equifax does NOT list the dates for late payments on the printed version of their on-line report is beyond me -- somebody should sue them.

This is what you can expect after making EVERY payment on time to the credit counseling service:

Your credit is destroyed -- MUCH worse than if you had discharged the debts through a Ch. 7 with immediate re-established credit.

Often the creditors report LATE payments because the PRE credit counseling minimum payments are not made. It's my opinion that by accepting the new negotiated terms, creditors report those lates in violation of the FCRA.  It'll be up to you to sue to find out if I'm right.  

I have NEVER heard of a credit counseling service assisting with the removal of those lates or other credit counseling related derogatory data.

Unfortunately, I HAVE read of credit counseling companies actually making the payments late.  In that case you'll have to sue THEM -- good luck!

Equifax credit report with consumer credit counseling notations and late payments


Summary - Morality and Ethics

I would definitely be all FOR a legitimate alternative to bankruptcy if I could FIND one.

However, all the credit counseling and debt negotiation companies I've dealt with fell way short. They were either credit industry financed "non profits" or unscrupulous debt negotiators charging outrageous fees.

NONE had a clue about credit or showed even the slightest concern with their clients' credit rating.  

MOST lied about the effect their program would have on the credit when my clients asked.

Few people actually read the small print in the contracts - I did.  You can't prove what they said, and they'll be happy to mail you the contract with your signature once you realize you got screwed and complain to them. Of course it's too late three or four years into the program, after you paid many thousands of dollars and you still can't get a loan because your credit is worse than that of people who discharged their debts.

I really can't make any recommendations without knowing the individual's situation, but until I find a REPUTABLE credit counseling company, bankruptcy is definitely worth looking into for those who qualify.

Also, while bankruptcy COULD be reported forever as per the FCRA and COULD result in the denial of employment, I have yet to find anyone who experienced that.

Morality, ethics and doing the "right thing"

Whether to discharge debts through bankruptcy, enter a credit counseling program, pay debt negotiators or just do nothing and ignore the collectors is a BUSINESS decision.  It has NOTHING to do with morality and ethics.

Morality and ethics are a 2-way deal, to be applied to PEOPLE who would hopefully also act according to those same morals and ethics.

Institutional creditors, i.e. banks, finance companies and national stores are corporations WITHOUT morals or ethics.

They will hound people for past due payments even if on the death bed or if someone lost their job and is desperately trying to feed the kids and avoid eviction.

These corporations have no feelings. They do NOT keep promises, they lie, they cheat working Americans out of their pensions and medical benefits, they rip people off on a daily basis with deceptive and misleading ads and lots of small print people can't even read.

I had to sue TWICE this last year to get my deposits back from national corporations.

Not because they couldn't pay me, for whatever reason, but because they did not WANT to pay me.  After all, most people never sue for their money.

I learned that Qwest (fka US West) is protected from liability by law in Arizona.  My repeated faxes requesting the refund of my deposit were ignored by US West. They had my money for over 2 years for NO reason, as they failed to establish phone service, also for no reason and without any notification. Judge John Taylor, Kingman, AZ, did not even award me the mailing and fax expenses.

VoiceStream Wireless refunded the deposit AFTER I filed the law suit. Judge John Taylor dismissed my case, he didn't even award me the filing fees.

So, ** I ** get nothing for MY trouble when I have to sue corporate because they don't pay me.

Compare NOTHING to the fees YOU pay when you miss a few credit card payments! Those double standards are rampant in the US and are fast becoming the "New World Order."

These often multinational corporations shouldn't be confused with the local auto repair shop that's also incorporated.  Many people reaffirm or voluntary pay discharged debts for professional services to doctors and dentists, local small businesses, etc. You can pay whoever you choose to pay after the discharge.

You read this page and some of the many postings at the forum and you STILL feel bad about discharging your debts through bankruptcy?

Give your spare dollars after the discharge to a charitable cause.

FYI: You see all those banner ads and get all that SPAM for debt negotiators because they pay tremendous commissions to their affiliates.

But WHY are so many radio, TV and newspaper "credit experts" recommending the CCCS?  

I doubt that there is a direct kickback.  I also doubt that these "experts" are just REALLY stupid and don't know any better.  More likely, the credit industry reps might have a talk with the editor/producer if the truth was spread by these "financial advisors."  Occasionally, a paper like the San Francisco Chronicle will actually print the truth in a special report, but it doesn't happen often.

"The Truth is out there .... just follow the Money!"

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