I'm writing this report as information to anyone that is considering using a debt reduction company.
My wife was losing her job due to the current economic situation and recognizing that she would not be able to make monthly payments on her charge card balances she first went to the state consumer debt counseling office to get advise. They analyzed her numbers and told her that even if she didn't spend a cent on anything but the credit card payments she just wouldn't have enough money to make the payments with unemployment insurance. She is over 60 years old and over 20% of the population is unemployed in our area. Finding a job would be very difficult.
My wife called the credit card companies, told them her situation and asked to negotiate the debt and payments. They would not entertain such an option. She saw the many advertisements for debt reduction companies and after the information she received felt that perhaps that was her best and only alternative.
My wife entered into a contract with Consumer Law Associates, LLC with the intent of having a competent party actively negotiate a reduction in debt on two credit cards. During the sales process they assured us that they had a very high success rate and we could expect to achieve approximately a 50% reduction in the debts. They also advised us that though the credit card companies had the right to institute legal actions, only a miniscule percentage did and we shouldn't worry about that.
We were directed to stop making payments to the credit card companies and avoid all contact with same which we did even while receiving dozens of harassing calls at all hours of the day and evening (on some days on every hour).
The way the process is designed to work is that we make fixed amount monthly payments to the debt reduction company and they build up a fund which can be used for settlements. What happens is first they take out their fee from these paymetns which was approximately $5000 and then charge an additional $85/month before they start building the reserve for you. Consequently it takes a very long time before any money is available for them to make a settlement offer. At the end of this narrative, I'll give you what I think is a better option for settlement.
She made payments for 16 months, basically using her total income from unemployment and during that time, half went to Consumer Law Associates fees and no offers were made to the credit card companies for settlement. This process probably works when credit card companies do not take legal action and a reserve for settlement is built up.in our experience the credit card companies did not wait. My wife was sued by one of the credit cards. I am semi-retired and we had to go into my Social Security check to pay nearly $300 to file papers responding to the legal action. Though Consumer Law Associates will provide legal advise, that advise appears to be designed to slow the process by requesting extra reports, etc. From the plaintiff so that a reserve of funds continues to build. It is not designed to settle the case. The lawsuit went to an arbitrator, the lawyer giving us advise from Consumer Law Associates did not send the arbitrator what was required, the arbitrator and credit card company lawyer were furious at this and the stalling techniques asking for more documentation and the credit card company was given a judgement for the total of the debt. Now in addition to the money she lost in fees to Consumer Law Associates and responding to the lawsuit and no negotiation by Consumer Law Associates on the debt, she has another bill from the arbitrator to pay.
Here is what I would recommend for anyone in debt with credit cards. Negotiate with the credit card companies yourself. Tell them you can not make their payments if it is true and you are not going to make any further payments. Build up a reserve that you can use for a down payment on a settlement.
A debt reduction company only provides a method for forced savings and building up a settlement reserve. This is all something you can do yourself without paying their very high fees. They do nothing you can not do yourself probably better.
If anyone has found a method for recouping the fees they've paid this company or similar companies, I'd be interested in learning about it.
Their contract is careful to avoid quaranteeing results but their sales effort gives the impression that they never fail. They do not negotiate your debt until they have saved enough of your money to make an offer and will basically do nothing to prevent you from a lawsuit.in our opinion they have a model and sales effort built on consumer vulnerability. They do not actively negotiate effectively, their customer service does not review information before contacting you and they do not provide the results they promise.
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