Bankruptcy

Debt Settlement Plans: Run as fast As You can, Consumers

By Nathalie Martin

Tell me the truth.  Does this sound legal?  Crystal has $12,000 in credit card debt, and ABC Debt Settlement Company advertised that they can settle credit card debts for 50 cents on the dollar.  We?ve all heard the ads ?Do you have more than $10,000 in credit card debts?  Banks got their bailout, now it?s time for yours.? 

When Crystal contacts ABC about the program, ABC advises her to stop paying her debts in order to show the credit card companies whose boss.  ABC has her sign a $515 a month electronic funds transfer from her bank account.  This money will be put into an account to use to settle with her credit cards, but guess what?  ABC has no agreements to settle anything with anyone.  But they keep collecting the $515 a month.

Crystal starts getting tons of hate mail and calls from collectors but ABC just tells her to sit tight.  "Can?t she see how desperate the banks are getting now?"  She goes to get an auto loan, and is shocked to hear that her credit is completely trashed.  Eventually she gets sued, but ABC says ?don?t worry, there is no need to go to court.  Once the suing company gets a judgment against you, they?ll be even more desperate to settle with you.?  Then her wages get garnished and she finally, after paying $6,180 over a whole year, calls and asks to cancel the program and recover what is in the account. No debt has been settled yet.

How much does she get?  Let?s see, that?s $6, 180 she has paid, less the $349 set up fee, less a $24.95 a month administrative fee for 24 months, or $598.80, but all charged up front in advance, a $19.95 monthly maintenance fee for each of the 12 months or $239.40, less a $249 termination fee, and we are at $1,436.20 left in the account.  However, the company then claims that because Crystal chickened out and did not stick to the program, not ABC?s problem or fault,  ABC is still entitled to its agreed-upon 20% fee on the total debt to be settled (which is now $18,000 due to all the late fees, etc.), so that fee is $4,500.  Here you go Crystal, here is what you get back?.$243.80..after paying $6,180.

Far fetched?  I wish.  Watch this.
Legal?  If so, why on earth?

Full post as published by Credit Slips on November 12, 2010 (boomark / email).