Many Consumers Better Served by Debt Settlement Companies
Madison, Wis. -- Consumers seeking to manage their debt have higher success rates when using credible debt settlement companies rather than credit counseling services, The Association of Settlement Companies (TASC) revealed today in its analysis of both industries.
TASC, the non-profit watchdog organization for self-regulating the debt-settlement industry, gathered the information from various sources, including the Consumer Federation of America and National Consumer Law Center, the Executive Office for the U.S. Trustees and testimony by credit counseling companies.
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"The main difference is that debt settlement companies work on behalf of consumers to reduce the outstanding balance of debt," Chris Kesterson, President of TASC, said. "In contrast, credit counseling companies work for credit cards and banks and usually only obtain concessions on interest rates. Thus, many consumers cannot afford credit counseling payment plans."
Other differences between the two services:
• Debt settlement companies do not receive any fees, contributions or other forms of compensation from any entities other than the debtor client. Meanwhile, credit counseling companies get money each month from their customers, plus they receive "contributions" from credit card companies and "fair shares" from banks.
• Debt settlement programs are typically 36 months or fewer. Credit counseling programs are usually 60 months or more.
• For consumers that complete programs, the total cost of a debt settlement program is usually about half the cost of a debt management program offered by a credit counseling company.
• Debt settlement programs achieve individualized and customized results depending on a consumer's circumstances and needs. Credit counseling payment plans are fixed payments over a length of time.
With both shorter program durations and lower budgeted monthly payments, debt settlement programs frequently see higher success rates and fewer dropout rates.
"It should be noted that since credit counseling does not seek reductions in the principal amount owed while only getting some reduction in the fees and interest, a consumer using credit counseling can make payments for some time and never get ahead," Kesterson said. "In other words, credit counseling often does no better than a consumer simply making minimum payments, which often cannot be afforded anyways."
About The Association of Settlement Companies
The Association of Settlement Companies (TASC) promotes fair business practices, consumer protection and industry standards for the debt settlement industry. TASC, founded in 2005, serves to protect consumers through an organization seal that represents best practices and standards of reputable companies. The organization also protects its member companies through lobbying efforts at the state and national levels, as well as awareness initiatives to educate consumers on debt settlement as a financial solution. All TASC member companies pledge compliance to strict association bylaws governing business practices and ethics. For more information, visit tascsite.org (http://www.tascsite.org).
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Comments
Comment from The Avenger on June 1, 2009 at 1:30PM EST
Sound "To The Colors" and hoist the BS flag. Watchdog, yuh huh. Every, and I mean every, debt settlement company my clients have dealt with just pocketed the money and never paid a penny to any creditor. I don't know of any creditor or CA that will take a settlement company seriously. This is a complete lose-lose-lose racket that only enriches the settlement scammers--until they get caught. And they DO get caught.
Comment from DONALD DALY on June 2, 2009 at 9:57AM EST
"Ain't I Great" compiled and published by TASC. The information that "member companies pledge compliance...yada, yada.." sure does put my mind at ease and changes my opinion now that I know the fox is guarding the hen house. I'd be disappointed if the counciling organizations across the country don't jump all over this press release and this half truth, self indulging article. Credit Counciling organizations teach consumers how to recognize what caused the financial crisis, how to resolve the current condition and move forward understanding the proper way to use credit in the future, wherefore on the other hand debt settlement comapnies charge very healthy fees, which are pre-paid by the consumer, then if there is any funds left over they start dealing with creditors. At their best the credit company and the consumer both loose, while the settlement company wins. Any creditability the consumer had left is destroyed, whereas the consumer counciling agencies are rebuilding the consumers credit rating/score while instilling RESPONSIBLE credit use vs another gimmick to cause others to suffer.
Comment from Sarah in AZ on June 3, 2009 at 12:53AM EST
The reality is debt settlement and debt consolidation programs are BOTH beneficial for consumers drowning in debt. However, not everyone falls into these 2 categories. Unfortunetly, the tough part is finding a reputable company who gives the consumer full disclosure. People talk about these topics and make ignorant comments like they're experts and the funny part is they form their opinions from other peoples opinions without knowing anything. Above The Avenger mentions that all of his clients who used debt companies were pretty much robbed and their creditors were never paid. Did you help your clients pursue these companies to get their money back? Are these companies still operating? Also, you stated you don't know of one creditor that takes settlement companies serious. I'm curious what you do for a living. Are you a debt settlement company owner? Are you a debt consolidation company owner? Do you have a formal education? Please don't take that personal but you sound like you don't know what you're talking about. Believe it or not, I own a very REPUTABLE debt settlement company who provides full disclosure. I get calls by the 100's and turn away consumers by the 100's because I know its not the right program for some individuals. If they are not qualified, my company rep doesn't hang up the phone. We help consumers any way we can. Have you ever heard of a DS company doing such a thing? Have you ever heard of a DS company actually educating consumers on the best route to take? Have you ever heard of a debt settlement company educating the consumer on steps to take themselves to better their financial situation? I reach out to people like yourself all the time. To be honest, its made quite a difference which makes my company that much more reputable. The great news is I know several other debt settlement companies that operate the same way. I hope you're truly helping your clients. Otherwise, they can come to me; I'll be more than happy to go that extra mile and seek refunds for every one of them.