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DEBT CONSOLIDATION
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6/3/2010 2:12 PM (PST)

I AM LOOKING AT A COMPANY CALLED CONSOLIDEBT IN ANAHEIM CA.
NEED HELP DECIDING IF THIS COMPANY IS ON THE UP AND UP.
ANYONE OUT THERE KNOW ABOUT THEM.
STEVE

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6/3/2010 2:18 PM (PST)

Steven,

This company has an F rating with the BBB. Check out the article on debt settlement posted in our "New Scams" section before you do anything, please. The article provides some in-depth info on this industry and you should be aware of the proposed rules on fees and disclosures that the FTC is considering for the debt settlement industry.

This company appears to operate as a referral agency to various law firms or other companies for debt settlement leads so they are not the company you would end up doing business with. These referral arrangements are “pay to play” deals, meaning that the referring agency receives some sort of consideration by the law firms for their referrals. This is a whole issue in and of itself, but more importantly, if you have read any previous posts here you will know that the experience of the BBB with debt settlement firms has been decidedly negative. Most people who complain about these companies state that their debts weren't negotiated, they were told to stop making payments, and the result is that they're in worse shape than when they started. Many are sued and are forced to file bankruptcy to rid themselves of the lawsuits.

There are many reasons why the debt settlement industry is under scrutiny by the FBI, Secret Service, State Attorney Generals, and other financial crime regulators. This industry is rife with companies using predatory fee models and deceptive advertising. Don't fall for the ads that are all over television: they are produced by slick third party lead generators and oftentimes if you call the phone number you see on TV you will be speaking with the lead generator who will screen your call for distribution to any referral receiver who will pay. The FTC’s proposed rules will shut down the industry as it stands today - for good reason.

Have you tried a nonprofit credit counselor? Check out www.nfcc.org to be connected to a local accredited agency and also check out their "Debt Settlement Consumer Alert". Their national hotline is 800-388-2227.

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6/3/2010 2:22 PM (PST)

Our experience with debt negotiating companies is that they attract customers with large credit card debt by claiming to be able to settle those debts for a fraction of their face value. They often claim that their services are more effective than those provided by credit counseling services and that they are a superior alternative to bankruptcy.

These companies usually instruct their clients to stop paying their creditors. Some companies direct clients to make their payments to the debt negotiation company instead. They promise that when sufficient cash has been accumulated to offer a settlement to a creditor, they will do so. They go on to say that their program may take two or three years to complete. Most companies collect their fees upfront and generally the fees are based on some percentage of the promised savings.

Other companies simply collect their fee and advise debtors to save their money to pay their creditors themselves. California law limits the amount of fees debt negotiators can charge, but by not collecting the money and distributing it to your creditors, companies can remove themselves from the limiting statutes and charge whatever they wish. What they are supposed to do for you while you’re saving up your money is to contact your creditors and inform them that they’re working with you, negotiate the amount to settle your debt, and ask them stop contacting you.

Complaints on these companies allege that creditors continue to harass clients, fees and interest continue to accumulate, and that the companies do not contact the creditors. Usually, creditors turn the claims over to collection agencies, file suit and pursue collection of the money owed to them. Debts are seldom settled, customer's credit is ruined, and many people are sued forcing them to seek bankruptcy protection. Typically, it is difficult to obtain refunds from the companies.

Debtors may not realize that if their creditors do accept a negotiated settlement, the amount forgiven constitutes taxable income.

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6/7/2010 11:14 AM (PST)

If you investigate the BBB rating you will discover that all companies involved in the debt industry receive an F. Unfortunately, Consolidebt is not even allowed to become a member of the BBB, which defeats the whole purpose of the BBB. The BBB should be providing a subjective rating for consumers to make an educated decision on whom to do business with. In the 2.5 years Consolidebt has been open it has had only one complaint lodged with the BBB (which was resolved). Consolidebt offers both Debt Management (credit counseling) and Debt Settlement. Both programs provide excellent results for those whose financial situation warrants enrollment and those who follow the program. The FTC and other government regulatory bodies are proposing legislation to provide a more regulated debt settlement industry. These regulations are welcomed by those firms who run their business properly and abide by self imposed regulations. Consolidebt provides an ethical approach to assisting consumers becoming debt free.

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