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The Truth Examines Despicable Lending Practices – Part 6 –
Beware the Quick Fix It Operators
By Zahra Collins
Sojourner’s Truth Reporter
“No credit repair organization may
charge or receive any money or other valuable consideration
for the performance of any service which the credit repair
organization has agreed to perform for any consumer before
said service if fully performed.” Credit Repair Organization
Act – Public Law 90-321 Sec 404 (b)
Yesterday the phone rang. It was a local number, not one
that you recognized, but since it was local number you
answered.
When you picked up the phone the voice you heard on the
other line asked you if “They are speaking with [insert your
name here].” After confirming your identity, the person
proceeded to inform you “That this is a call from a debt
collector. This is an attempt to collect a debt. Please
note, that this call may be recorded for quality and
training purposes.”
You took a deep breath and continued with the call. Today
the same thing happened, except this time they called the
house and your cell phone. Tomorrow will be the same, you
know this because it has been going on for the past three
months, ever since the account became delinquent.
You know that you do not have the funds to pay this debt, if
you did, your payments would be current. You feel hopeless
and desperate for a solution, any solution, and are thinking
to yourself “I cannot keep going through this.”
You have heard the names of companies and programs
supposedly able to help you repair your credit and get you
out of debt. The advertisements are everywhere!
You hear the credit repair ads on the radio and ever since
you searched “Debt Help” on Google you see them all over
your social media, in your Facebook, Instagram and Twitter
feeds. You do not really want to call some stranger for help
but, you have received so many of these calls that you are
overwhelmed, something must give.
What are you supposed to do and who should you trust when it
involves your money?
Because that is really what we are talking about here.
MONEY. How much you owe, and how it is affecting your life.
Somewhere along the way Credit Worthiness has equivalized to
mean Trustworthiness in our society.
It has therefore become common practice for employers,
rental companies and housing complexes to look at your
credit report to determine your worthiness, in addition to
banks and retailers, when extending credit.
You need a solution. A solution that helps you to rebuild
your trustworthiness.
When looking at options for addressing credit and debt
concerns there are viable solutions out there, however,
consumers must be vigilant when looking at and considering
these options.
Of the top solutions available, consumers usually choose
between debt consolidation, debt relief or credit repair.
How do you sort through the radio, TV and social media
advertisements for companies offering these services?
When seeking out a “Fix-It” company, consumers should be
mindful of exactly what they are buying. It is important
that you clearly understand how the company operates, what
their services include and the costs associated with the
participation in their program. Keep in mind that not many
of these companies actually work for the consumers benefit.
Debt Consolidation
“Fix-It” option 1, offers a debt consolidation. On the
corner of Reynolds Road and South, in Toledo, there is a
large brick building. Before it became the new State Farm
Insurance Building, it had signage that read Apprisen. The
corporate name of this company is
Consumer Credit Counseling Service of the Midwest,
Inc. It also operates as Apprisen and Apprisen Financial
Advocates. Based out of Gahanna, Ohio, Apprisen is a 501c3
non-profit organization. Apprisen’s website states that “As
a non-profit organization, we rely on grants, voluntary
contributions from creditors who participate in our debt
management plans, donations from financial institutions, and
client fees.” They offer many services and debt
consolidation is one of them.
About three years ago, Robert and Judy (not their real
names) made a decent living. However, upon retiring, they
found that the amount of their monthly debt payments in
addition to their living expenses were beyond the means of
their income. The couple sought out help and ended up at
Apprisen. They were enrolled in a consolidation program.
Instead of making individual payments to their creditors
they made one large payment to Apprisen and the company made
payments to each creditor on their behalf.
Most consumer credit counseling companies are pre-disposed
to arrange the highest monthly payments when structuring the
repayment plan. Several personal expenses are not included
in their calculation therefore the monthly payments are much
higher than the customer can consistently afford. This
results in an 85 percent default rate of all consolidation.
It is imperative to enroll in a program that disrupts the
cycle of debt and the failure to repay that debt. In this
case, although the Robert and Judy were able to make their
payments on time and completed their program, they wasted
thousands of dollars because of the default on the debt.
Unfortunately, not all individuals who seek out debt
consolidation from companies like Apprisen are able to keep
up with the high monthly payment and find themselves in a
worse situation than where they started.
Debt Relief
Not all debt relief companies are created equally.
When searching for a company
to assist you with debt relief you must weigh the pros and
cons of each company that you are considering. When
seeking out this option, Ohio consumers should choose to
work with a business registered in the State of Ohio. Here,
in Ohio, legislators have passed several laws that protect
you, the consumer, when it comes to dealing with companies
that offer services to residents facing financial
difficulties.
Below is a summary of Ohio Revised Code 4710.01 referred to
as the Debt Adjusters Act (2004) and Ohio Revised Code
4712.01 the Credit Services Organization Act (2004) taken
from the Ohio Attorney General’s website. The two laws are
the cornerstone of protection mandating how Ohio companies
can operate.
Debt Adjusters Act (2004)
ORC 4710.01
-
Set rules and regulations for nonprofits and other
businesses that offer credit repair services, debt
counseling, budget management and related services to
consumers facing financial difficulties.
-
Requires debt adjusters to file annual financial
statement with the Attorney General's Office.
-
Requires debt adjusters to submit funds to creditors
within 30 days of receipt, maintain separate trust
accounts for these funds, and maintain $100,000
insurance coverage.
-
Prohibits debt adjusters from accepting more than $75
for initial consultation, accepting more than $100
annually for consultation fees or contributions or
charging more than 8.5 percent of amount paid by debtor
each month or $30, whichever is greater.
Credit Services Organization Act (2004)
ORC 4712.01
-
Mandates registration and bonding for organizations that
offer credit repair, debt counseling or related
services.
-
Gives consumers a three-day right to cancel contracts
with credit service organizations.
The most notable thing about debt relief is that it does
work, if done correctly. The overall principle is to
position yourself to accumulate enough funds that allow a
negotiation to take place. Companies are not happy about
taking less than the amount owed and certainly are not in
favor of continued broken promises of payments. Debt relief
offers all parties a structure to understand and work from.
It also offers a solution that does not represent
bankruptcy.
Traditional debt relief companies are also referred to as
debt settlement companies. They usually combine legal
services and banking services. The legal coverage offers
consumer protection services as well as some negotiation of
debts. They deposit a portion of your monthly payment into
an escrow account for future settlement leverage while a
larger portion goes towards legal administration fees.
The downside of these programs is they are rarely explained
accurately or in full. The industry has a black eye because
most people believe once they have signed up with the
program that the largest portion of their deposits are going
to creditors to resolve debts.
The reality is that the first 10 to 14 months of payments
are used to pay legal fees and commissions. The ball does
not really get rolling towards debt elimination until
approximately after the 10th month into the program.
You may have heard of national companies such as Peak Legal
Advocates who are a traditional debt settlement company.
George (not his real name) has power of attorney for his
parents and helped them to enroll seven large debts into
Peak’s program. After $21,000 and four years in the program,
they found that only three of their four debts had been
settled.
After a little investigating, George found out that the
majority of the funds that paid into their program had been
used to pay fees rather than settle the debt. He made call
after call to Peak in order to get an understanding of what
was being done for his parents.
Only when there was the threat of cancellation were return
calls made to him and his parents with explanation of their
program. “I was frustrated,” said George when asked about
his experience, “They said that the account was notated with
returned calls to me, but that just wasn’t true. They didn’t
call me, not on my cell and that is the number the woman
said she called.”
You will find that local debt relief companies offer
consumers an opportunity to have a full conversation
detailing programs and how it will affect their financial
lives. In addition, the premiums paid are not allowed to go
to fees or commissions until the actual debts are settled.
This allows consumers to start moving forward more
aggressively.
“The difference between a national internet based debt
relief company and a local firm is like night and day.
Finances are intimate enough that you should have the option
to sit with someone face to face and get a “feel” for your
best interest. Local firms are more likely to clearly
explain the details of your program which will enhance the
experience resulting in a more successful endeavor.” Say
Derick Gant, owner of Smart Money Management, a Toledo-based
financial management firm.
Credit Repair
When it comes to addressing debt elimination, credit repair
is not all that it is cracked up to be. While consumers may
see immediate changes and increase to credit scores, credit
repair is the morphine shot that allows consumers to
continue in the game while masking their pain and causing
more internal damage.
According to the Federal Credit Repair Organization Act (CROA)
it is against the law for credit repair companies to sell
you falsehoods about what they can do for you or charge you
before services are rendered. Credit repair companies are
also required to tell you exactly what they are doing, how
much it is going to cost, how long results will take and any
guarantees the company makes.
If you keep track of your credit report and find that you
have discrepancies on your report, companies that offer
credit repair services like Lexington Law may be able to
help you. However, keep in mind that these companies charge
you for disputing inaccuracies to your credit report,
something that you can do yourself. Consumers should attempt
to dispute their report before turning to an outside company
for help.
In addition, having items removed from your report does not
make them go away. Just because a debt is no longer seen on
your credit file does not mean that you do not still owe the
debt. Typically, credit repair companies are able to have
older debts and inaccuracies removed.
However, there are companies that purchase old debt and come
after consumers for the debts that they purchased. Having
the debt removed that is listed under an old creditor, does
not stop the new owner from coming after consumers for
payment nor reporting negatively to the credit bureaus for
non-payment.
Do you need a quick solution? Virtually guaranteed to repair
your credit in as quickly a manner as possible?
One local credit repair company offers its clients the
opportunity to repair credit – within six short months in
some cases. Just take a look at a company named Witness
Riches (which declined to return The Truth’s telephone
calls). Go online to the website and sign up for help – and
provide an up-front fee of $75 to have the pleasure of
merely speaking with someone.
“No credit repair organization may
charge or receive any money or other valuable consideration
for the performance of any service which the credit repair
organization has agreed to perform for any consumer before
said service if fully performed.” Credit Repair Organization
Act – Public Law 90-321 Sec 404 (b) |
