The Today Show recently did an expose on debt settlement companies. While I agree wholeheartedly with their negative opinion on most debt settlement firms, they have failed the test of fair and balanced journalism.
Investigative Today Show reporter, Lisa Myers, spent all of her time uncovering the ugly truth about one company, Credit Solutions. If you remember an earlier post on my blog (http://debtsettlementstory.com/debt-settlement-companies-some-incur-more-debt/), I had also contacted this company. I was almost desperate enough to fall for their sales pitch. Luckily I didn’t. Here’s a review of their pitch in a nutshell:
- I was to deposit $2000/month into an escrow account.
- The first 6 months of these payments into that escrow account would go towards paying the debt settlement company for their services.
- I would continue to make $2000 payments for approximately 36 months.
- As settlement offers came in, they would consult me.
- The banks would be paid from this settlement account.
- In 36 months, I would be out of debt.
In reality it doesn’t work this way. Most consumers never finish the program. In fact, once the settlement offers come in from the banks, most clients don’t have enough money in their escrow account to pay the offer. Most of their immediate monies have been used to pay the debt settlement company’s fees. Most consumers file bankruptcy.
This is the exact conclusion Lisa Myers came to. However, she fails to see the bigger picture. Not all debt settlement companies have such egregious practices. In fact, there are about half a dozen or so that are true consumer advocates.
She got it right when she said the FTC will soon pass laws banning the upfront fees. Why didn’t she go on to say there are debt settlement companies out there who ALREADY take their fees on the back end?
Unfortunately, Ms. Myers’ article is the typical sensational reporting that we have come to expect. There is nothing positive about her piece. No real help to the desperate consumer. Only doom and gloom.
Had the Today Show really wanted to investigate debt settlement companies and actually disperse useful information to help those in need, she would have mentioned companies like Consumer Recovery Network, Zip Debt, Hoffman Brinker and several others who really make a difference in this sector. Here’s what’s great about these debt settlement companies:
- No hard sell of their program.
- You talk to a real debt settlement counselor, not sales person, when you call the company.
- Performance based commissions that are paid AFTER YOUR CREDITORS GET PAID!!!
- DIY programs offered for those consumers who are industrious.
In fact, all 3 of the companies I mentioned ENCOURAGE the consumer to do it themselves. They make less money per client with this business model, but they know the success rate is much higher and the benefit to the economy is much greater.
Here is Today’s video.
Stay afloat. Stay focused. Wealth and freedom are in your future.
POST # 2
When I look back on what happened, the writing was on the wall. If I had been smart enough to have a business manager, this would have never happened.
In 2004, things were going great. I was newly married, had no kids, no debt and had just bought my first home. I was composing music for the hit television show Joan of Arcadia. Money was no object. I was like a kid in candy store. Just 4 years earlier, I was living in a mini-van with my wife (then girlfriend) touring the United States as a folk rock duo, Dogwood Moon. We were lucky to make $5,000/month and if we did, we felt like we had money.
All of sudden I got a lucky break and I was making well over $400,000/yr. I had no debt aside from my home. My savings account was steadily growing and about to hit $100,000. Neither my wife, nor I, could spend all the money. It was nice, to say the least.
We went about our business for the next 2 years. Saving a bunch and spending a bunch. I justified my spending because I had a great job and was saving a butt-load of cash every month. Why not spend!?!?
Mistake number 1:
ASSUMING THE GOOD TIMES WILL LAST FOREVER
Fast forward to 2006.
My TV show got canceled.
The economy tanked.
My interest only 2 yr ARM was about to be called.
My wife gave birth to our first beautiful child.
None of my contacts in the biz were working.
I went thru all of my savings…..yup ALL $100,000 of it.
I borrowed another $80,000 from a line of credit on my house.
There were a lot red flags….but I ignored them.
I kept thinking that big gig was right around the corner. Well guess what? It wasn’t.
But that didn’t stop me. I kept acting like I was still making a lot of money. I had the POTENTIAL didn’t I? Why severely adjust my lifestyle when things will pick up any minute?
By the end of 2006, I finally made some changes. Here’s where I stood:
I sold my home for a profit.
I paid off the $80,000 line of credit.
I had about $80,000 in cash profit from the sale.
No job, but lots of prospects.
Ignorant hope that everything would just work itself out.
Instead of socking that money away and downsizing to an apartment within our means. I did what any wide-eyed monkey with a little bit of money and the ignorant hope of future success would do:
I BOUGHT ANOTHER HOUSE AND SUNK ALL OF THAT MONEY INTO REMODELING IT.
You see, I had turned a nice profit from my first house. That was easy, right? It would happen again, right. WRONG. That wrong assumption was the straw the broke the camel’s back.
From July 2007- July 2009 I dug myself into the deepest financial hole of my life.
Here were my other BIG MISTAKES:
I lived beyond my means.
Instead of saving some of my small real estate profit, I put it back into the sagging real estate market.
I continued to spend most of my time trying to get gigs in the TV market – which had crashed.
And finally: DENIAL, DENIAL, DENIAL!
In July 2009, things came to a head. I was $130,000 in debt and living off my lines of credit. I had 2 more months of that until there would be no choice other than bankruptcy.
Desperation is the mother of invention. I would feel humiliated to go bankrupt, foreclose on our house. I couldn’t let myself be a Hollywood statistic……even though I already was!
After 6 weeks of research I came to the conclusion that debt settlement was the right choice for me. In the next few posts I’ll discuss:
Why I chose debt settlement over bankruptcy, consumer credit counseling or debt consolidation?
What companies I chose to avoid and why?
Stay tuned, stay afloat. WEALTH AND FREEDOM ARE IN YOUR FUTURE!