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Consolidate Debt - Avoiding Illegal Debt Consolidation Practices


  • pg 1
									                                               Presented by Daniel Toriola

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                          Consolidate Debt - Avoiding Illegal Debt Consolidation Practices
                                                          By Clinton Maxwell

   Debt consolidation does have its unsavory side. It is not hard to see that the numbers of debt
consolidation firms has increased over the past three years. On the Internet alone they were amongst
the major advertisers and now they out rank the household names with television commercials.
Unfortunately a few of these so-called debt consolidation firms are being found guilty of illegal
practices, especially in reference to the use of ‘non-profit’. More and more are facing lawsuits from the
FTC, the IRS and countless attorney generals nationwide.

One such firm is not only subject to a federal suit, but action by the FTC and now five separate state
lawsuits against it. The firm even went as far as declaring bankruptcy, but they have not stopped
operations. In fact they merely changed their names and resumed operations under as different
companies. This was one of the worst so far.

Not surprising though is the fact that a lot of companies are no longer referring to themselves as ‘debt
consolidation companies’ because of the bad media attention this case has spawned. With that in mind
you need to be cautious and avoid companies that hide under the guise of debt negotiators or debt
settlement firms. Some of them are in fact the same type of companies who are still acting illegally.

You are best to do background checks on debt consolidation firms, or any company, through your
consumer protection agency and/or your local Better Business Bureau. However, even the feedback
from the latter is not reliable. A good rating with a business bureau means nothing. More than 75% of
complaints against any company does not impede the ratings if a resolution has been found. Also note
that the Better Business Bureaus have no jurisdiction to investigate any complaints against debt type
consolidation firms and definitely not authorized to make any resolutions.

The best advice that can be given is to simply avoid debt type consolidation firms that have registered
addresses in either Florida or Maryland states. Sadly these states have no regulations to govern them.
With so many varied firms available offer these services nationwide you may choose to air on the side
of caution and look in other states, which could save you a fortune and the inevitable concern over any
dealings with such companies of ill-repute.

There are some websites that deal with customer reviews, specifically geared towards debt
consolidation firms. It is worth looking into as you can get useful feedback from those who are or did

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                                               Presented by Daniel Toriola

use the services of a company that you may be considering signing up with.

Clinton Maxwell frequently produces newsletters on ideas associated to debt management and credit
counseling. His publications on consolidating debt are found on
http://www.debtania.com/consolidating.html and other online sites.

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                                                 Presented by Daniel Toriola

                                                  How to Consolidate your Debts
                                                       By Talbert Williams

In order to do this, you can either approach one of your existing creditors with a debt consolidation
plan, or else you can talk with a third party lender about the possibility of taking out lending with them
in order to consolidate your existing outstanding debt.

In this regard, it is very important to understand that “debt consolidation” is not new money lending.
Any lending you are given is merely to consolidate the existing debt you have, and the lender will ask
you to declare and account for this. So, although debt consolidation may be considered a “loan”, it is
not a loan in its purest form.

Reasons to Consolidate Debt

The overall reasons why you may wish to consider debt consolidation are two-fold:

•In order to try and reduce the cost of your existing debt funding.

•In order to try and do away with all the mess of having to pay back lots of creditors and instead
concentrate on one or two large creditors; thereby hopefully making your money management
problems much more manageable.

As you can see then, given the right circumstances, debt consolidation can be an extremely useful
debt management tool. However, if you are considering debt consolidation as a means of managing
your existing outstanding debt, you should also note that there are two ways you can put in place an
effective debt consolidation program: (1) by yourself; and (2) using a debt counseling service.

Should you Consolidate Debt by Yourself?

In short, debt consolidation programs undertaken by you are by far the cheapest form of working this
useful debt management program. But, self-regulated debt consolidation programs do require a certain
level of discipline. They do require you to arrange for one or two creditors to accept to take over your
existing smaller debts.

They also require you to make payment to this creditor in a timely manner. In other words, there is no
financial overlord looking over your spending and making sure you stick to a workable financial diet.
For this reason many of us who consolidate our debt believe we have just been given a new lease of
life and go out and spend, spend, spend. The net result of this is not only do we now have new debt to
repay, but we also have the large consolidated debt to repay. As such, self-regulated debt
consolidation may not be the most effective debt management tool.

Debt Counseling Services

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                                                 Presented by Daniel Toriola

Conversely, debt counseling services are where you tell a debt counselor what all your existing
outstanding debt is. The debt counselor then either arrangers with your existing debtors to negotiate
with him going forward with regard to the outstanding debt, or arranges to consolidate all the
outstanding debt as one large debt. You then pay the debt counselor a monthly payment, which he
then either distributes to all of your existing creditors or pays towards the one large debt. For providing
this service the debt counselor takes a commission off of you; thereby making this form of debt
consolidation more expensive, but at the same time probably more effective.

Talbert Williams offers debt consolidation referrals and advice. For more information, articles, news,
tools and valuable resources on debt solutions, visit this site: http://www.1debtfreedom.com

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                                               Presented by Daniel Toriola

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