june 04, 2010 09:32am

Debt Settlement Blog

When consumers with mounting debts get desperate, they often turn to what can seem like their last, best hope: debt settlement companies.

Those companies are taking on an increasing number of clients as more consumers find themselves unable to pay their bills. Bankruptcy filings are up 30 percent over last year, and many consumers have so much debt relative to their income that debt settlement companies decline to take them on as clients. (Credit counselors, who focus on financial literacy and rehabilitation rather than negotiating lower payments, often work on those more severe cases.)

For a fee, struggling consumers can hire a company like Financira, which currently works with thousands clients. Our clients have between $6,000 to over $250,000 of unsecured debt, which includes credit cards, overdue rent, and utility bills.

How does debt settlement work?
People call us to ask about signing up for the program. We help them start the process of saving money and then contact their creditors [on their behalf]. We usually get creditors to accept a 40 to 60 percent settlement rate. This month, we're getting a 37 percent settlement rate. The companies are willing to accept that because otherwise, they could get nothing. Generally, at that stage, people are going to go bankrupt, and it's hard for banks to know what's going on. Hardship clients [people who are experiencing major life challenges that make it impossible for them to pay their bills] don't have much money, and sometimes the bank never gets paid.

Do you also help teach clients how to save money?
We don't give legal advice, but we do tell people how they can save money. We go through their debts and pick which ones they should do first.

Does it hurt a person's credit score to do that?
It can hurt it temporarily, but in the long run, it's better to get out of debt. Around 25 percent of clients who get out of debt do it in a year or less. The other 75 percent do it in a two- to three-year time frame. It takes time to build up funds.

Posted By: financira

november 16, 2009 01:55am

USOBA Conference 09

In order to stay current with the debt settlement industry, our staff attended the recent United States Organization for Bankruptcy Alternatives conference in Dallas, TX.

Among the items discussed were the upcoming changes to federal law regarding credit cards, and how these changes might affect clients' ongoing settlement programs.

There was also a presentation on to the importance of agencies achieving a BSI Certification, which, similar to ISO 9000, audits a companies standards, practices, and organization. Financira completed this certification over the summer, so it was good to discover that we were ahead of the curve.

Posted By: financira

july 10, 2009 08:28am

HR 627-2

What does the new credit card law mean for consumers?

At least on the surface, HR 627 appears to make many changes in the way credit card companies are able to deal with their customers. Among the important changes are:

- Limiting interest rate increases(limited to the end of promotional rates, variable rates and as penalty for late payment)

- Limiting the conditions for charging “over-limit” fees

- Giving consumers more time to pay their monthly bill and changing the terms by which a payment can be deemed “late”(payments that arrive on days when the creditors are closed can no longer be considered late).

- Eliminating the practice of “universal default” where a creditor can penalize you for issues unrelated to their accounts. For example, a client may no longer have their interest rate increase by one creditor because they are having trouble with another. This does not apply for multiple accounts with one company.
- Creditors must also provide more information to their customers about their minimum payments, including both “How long an account will take to be paid in full at the minimum”, as well as “How high would he payment need to be to satisfy the balance in 36 months”. This is an important provision for those considering help with managing their debts, as it will show precisely what they’re up against if by paying on their own.
To know for certain how many these changes will be practical and how many will be strictly “on paper”, we’ll have to wait until the law takes effect. For example, in the case of over-limit fees, a client must be notified if they are going to charge an amount that would exceed their credit limit and given the choice to “opt in” and pay the penalty. However, most accounts that are in “Over-limit” status are made so by fees and interest, which is not clearly addressed. As a whole, the law seems to address several longstanding complaints that struggling consumers have made, which in turn should make managing debt easier.

Posted By: financira