One of, if not the largest shortcoming that exists in the current system designed to provide people struggling with debt an alternative to bankruptcy is – Information. That we have come through the “information age” and fallen short of including more of it in professional debt relief products and servicing is a failing that can and should be fixed.

A system that better educates and thoroughly informs consumers about their debt relief options; intervention steps available to them that can be accomplished on their own; through service providers charging only fair and affordable fees; all with a consumer first focus – Is Here.

In an effort to be a catalyst for continued industry change; deliver enhanced value to consumers; and to bring complete information and tools direct to consumers; CRN now offers industry professionals training and access to efficient and effective technology systems for our successful methods in educating and supporting consumers through the debt relief decision process and delivery of debt reduction solutions.

So – what’s on the table? Let’s dig in.

Program Design:

The initial focus of this education platform is to assist customers with reaching informed decisions about their options for managing debt they can no longer afford to pay weighed against current and projected income, individual hardship circumstances, and future financial goals.

The education, support and communication systems next place consumers in the best position to take actions steps to manage some or all of the debt relief activities on their own, while offering continued access to professionals and peers. Consumers can also connect with service providers directly when needed or requested.

Your customers will be subscribed to information and individualized support allowing them to:

• Reduce monthly payments via DIY DMP efforts or as provided by a CCA
• Negotiate debts for less than balance owed through DIY settlement or full negotiation services provided by attorneys who charge based on contingency and at a rate of 15% of savings
• Why bankruptcy may be the option of first resort, not last – as it is often referred to.
• Direct access to discounted bankruptcy assistance
• Cost/Time/Resource benefit analysis

Capitalize on existing market reach:

You can simply refer people into the system with confidence knowing that the education and information is supported by knowledgeable professionals with years of experience in delivering unique and tailored strategies to your customers who can depend on fair and honest experienced support beginning with assessment and continuing through implementation and ultimately – successful resolutions.

You will be able to monitor and track activity with access to reports set at intervals and frequency you choose.

Expand existing products and services:

Established industry participants have the opportunity to earn while you learn. We provide executive level, supervisor/manager, intake/consultant/counselor training that will allow you to manage your own platform delivery, product and servicing support. In this way, you can provide meaningful value and experienced support to your customers while your internal resources are acquiring skill sets and compenetncy levels consistent with your management, and control protocols.

Give yourself and your customers a competitive edge:

One significant market impacting attribute of this product and delivery system is the inclusion of proven upfront DIY settlement education that is supplemented with ongoing information and detail accessible to subscribers. This feature encourages consumers to:

• Confidently speak directly with their creditors in order to effectuate settlements without the need and expense of third party negotiation services.
• If direct debt settlement services are requested or needed they are available and offered by attorneys and established industry professionals at a rate of 15% of savings.

Access to proven DIY settlement strategies and support often lead to accelerated customer success because money is going to creditors instead of fees for services. With direct services available on an as needed basis, at half or less the cost of the industry norm, more customers will reach their debt relief goals.

Help people help themselves and connect them to affordable services:

Connect customers with your designated product and service partners. Whether you work with partners who deliver HUD or bankruptcy counseling, or provide same internally; where you connect those seeking bankruptcy or other competent legal resources; connect customers to debt and credit products and services of virtually any type – you have the ability to manage internal and external relations. If you need recommendations we can provide them.

The ability to maintain your internal and external work flow assists our partners with managing their reputation while maintaining current professional relationships or creating new ones, further economizing CPA and/or maintaining existing revenue channels.

Some of the partnerships you may already have, or may choose to connect with include:

• Bankruptcy attorneys
• Attorneys providing direct debt settlement services charging a performance fee of as little as 15% of savings
• Credit Counseling
• HUD approved housing counseling
• Judicial foreclosure defense (in court)
• Attorney managed loss mitigation
• FDCPA protections

Systems delivery and efficiencies using proven technology:

With over 500,000 custom lines of code, there are many features to outline. What follows are but a few.

• Custom Enrollment Package, program types, program length, and EP submission pages for the Sales team.

• The Create EP module uses actual settlement data history to calculate estimated settlement for creditors/collectors

• Electronically store documents

• Custom enrollment checklist with multiple categories and items

• Ability to group creditors for easy deployment of policy changes

• Access to hundreds of built-in letters and reports

• Ability to modify our built-in reports and request custom reports

• Easily print and export data to Excel

• Users can define their default searches and activity views

• Easy navigation through the use of tabs and context menus

• Ability to track changes made to customer data

Client Login:

• Educational links and courses

• Financial Analysis tools, including custom form for the client to submit or change their monthly budget

• Useful debt, credit, and financial related links, calculators and tools

• Custom Company Contact info page

• Real time access to their account status, including all enrolled accounts and current statuses

Tasks and Events:

• Add notes and create follow-up reminders

• Attach documents to the client’s file

• Set up appointments based on availability and easily check the availability of every specialist or counselor

• Easily set up your appointment slots several weeks in advance with recurring appointments if necessary

• Ability to schedule for follow-up for a specific date and time

• Link documents or other attachments to each issue note

• Customize your own To-Do lists and set up custom workflows for automatic redirection of work

Fees, ACH, Payments:

• Set up multiple due dates and disbursement dates

• Automatically calculate one-time fees and monthly fees

• View balance forecast of each account using custom dates

• Create and submit ACH debit files to your financial institution

Customizing to fit your needs and the needs of your customers is available

This partnership platform will be ideal for existing service providers to immediately help customers who do not qualify for programs you currently support while providing substantive upfront value. Given time and levels of market adaptation, this platform will usher forth broad and helpful impacts to:

• Debt relief industry servicers
• Marketing
• Financial services
• Media
• Regulatory oversight

The content and delivery platform is where the industry needs to be when informing and assisting consumers. This is where we as an industry should be given current and ongoing regulatory and oversight realities. The system provides lower cost efficiencies for current market needs while maintaining flexibility to adapt to future opportunities and realities.

Whether you simply wish to connect people to affordable and reliable resources when looking for answers and effective tools to deal with overwhelming debt, or would like to expand your available product and services, I invite you to ask questions and comment below. If you would like to schedule a time to learn more details you are welcome to contact me directly.

Working together we can build a more effective and productive debt relief industry future.

Michael Bovee

info@consumerrecoverynetwork.com

208-265-8884

I generally begin any consultation I do with people who reach out to my company in search of help with debt with this question: “What has you reaching out to a perfect stranger? What is going on with you financially”? Then, I shut up and listen. I am sometimes the first person the caller has ever spoken to about the situation they are in.

The responses I hear vary, as does the time someone will take to outline the details of their hardship. By listening closely, I am able to hear the stress and fear they have about their debt. I often hear the struggles they have gone through to try and keep current with credit card bills, or the difficulty they have had in communicating with creditors and collectors.

The other day, I heard one of the simplest and shortest answers to my initial question that I have had to date.

“My Debt Is Crippling Me.”

While this response does not provide details I generally look to key off of in order to identify the debt pieces or solutions to putting the person’s financial puzzle back together, it said a great deal in a very powerful way.

Struggles with debt DO feel crippling. In the very sense that someone with a physical disability is forced to deal with every day of their lives. The stress and fear with debt problems are debilitating and can often manifest into actual maladies. The worry and frustration about money, and the lack of money, carries over from one day to the next. What am I going to do at the end of the month when these other bills are due? When will I ever be out of credit card debt? How did I get trapped in a home now worth far less than I owe? What if I get laid off with no savings? How would I get by with maxed out credit cards and no income?

One of the overwhelming benefits to people we talk with is that we can reduce, or even remove the stress and fear they have about their debt problem in one phone call.

This gentleman did not feel crippled when we finished talking about his problem because I plainly laid out the facts of his finances (after several additional questions to be sure), and was able to point out to him the mathematical rational solution to his debt. His solution did not involve needing to engage my company for a product or service, as he was past the point of debt settlement or a creditor sponsored hardship plan being a viable option.

He learned that, unlike someone who has a physical disability for the rest of their life, his crippling debt could actually be cured and with little fuss or expense. He was not at all excited to know that his only real option was to file for chapter 7 bankruptcy, but he saw the wisdom in doing so and hung up the phone with no fear and less stress.

I asked him before we hung up from the call “How crippling is your debt now?”.
He replied “Not at all.”

There is always and answer to recover from debt. The answers do often involve tough choices and some action steps that are not exactly a thrill to take, but can be arrived at through the process of elimination. Generally, I can walk through the following things and eliminate 3 or 4 out of the 5:

• Creditor monthly payment concessions
• Debt Management Plans through a credit counseling group
• Bankruptcy
• Debt Settlement
• Doing nothing (sometimes the right thing for brief period – couple months)

Knowledge removes the fear of the unknown, and unemotional, boring, old arithmetic is the compass to find your way to healthier finances.

My advice to anyone feeling crippled with debt boils down to the “Four Gets”:

• Get real about your finances;
• Get informed about your options;
• Get a plan in place; and
• Get started

If you would like to start getting informed the same way the man who inspired this article did, think about enrolling as a CRN member. Click here to learn more: Debt Help

Your credit score and loan product modeling is calculated not just by your timely payment history, but is also based on your credit utilization, debt to income ratio and a few other key points.

Due to how information in your credit report is factored, mistakes made by those furnishing information about you to the reporting agencies can have a major impact on how much credit will cost you and whether you are approved for a credit product at all.

This morning, I read a good example of the type of damage that can be inflicted by a simple loan classification error:

Issue: Most scoring systems take data at face value with little or no interpretation. If you track the erroneous “Installment Loan” designation downstream, the credit scoring systems would see the following:

• An installment loan for an extremely large sum (i.e. $200,000).
• Duration of payments for these loans was reported as 30, however, the number reported for an installment loan is seen by Metro 2® as 30 months, whereas, the number reported for a mortgage is seen by Metro 2® as 30 years.

Result: Most credit scores would be calculated based on the facts reported — “Installment” loan of $200,000 with what looks like payment term of 30 months. In effect, a 30 month payback period would require each payment be approximately $6600, whereas a 30 year payback period would yield a monthly payment in the vicinity of $1000. The perceived debt of $6600 per month could potentially negatively impact multiple factors of consumer lending such as approval scores, debt ratios, bankruptcy scores, pre-screen scores, etc.

And those types of errors are just the tip of the credit reporting iceberg. From a potential litigation standpoint, data furnishers that do not invest the time and resources required to evaluate the accuracy and integrity of their credit reporting on an ongoing basis are making a potential titanic mistake.

To read the full article click here: troubling times ahead for credit bureau data furnishers

This type of loan classification error would seem easy for the furnisher to fix. Indeed, common sense dictates that it should be fixed.  It will cost money to do it though.

My experience with reporting agencies and furnishers is that they do not always think with “sense”, but think more in terms of dollars and “cents”.

The key to “common-cents” and violations of the Fair Credit Reporting Act (FCRA) is that it is more profitable to do the wrong thing than the right.

Some credit report information furnishers get it absolutely bass-ackwards.

They seem to be saying “We know we have a problem and that it screws people over, but we will continue to do so until it is more cost effective to fix the problem than to continue to get sued”.

The linked article above speaks to a specific case in the 9^th circuit that allows a class action to proceed against one company that may end up costing them between 29 and 290 million. My guess is that their legal defense bill alone would have covered the costs of auditing and correcting their reporting systems on a regular basis which would prevent actions like this from occurring.

It is a small wonder to me that more legal action is not brought against furnishers of bad information about you to credit bureaus.

Similar to the economy of furnishers and reporting agencies making changes only when it makes “cents” to do so, suing them for their transgressions and missteps has long been about the costs for bringing the action and what can be gained from doing so.

Perhaps this attitude will change with the potential for more class action lawsuits that can lead to tens of millions in costs.

Perhaps there is a class out there forming to bring the particularly egregious practice of reporting a balance still due after a settlement on a past due debt is reached, accepted and funded, and where both parties agree that the debt is settled, there is no balance due, but the amount of debt forgiven remains on the trade line and shows that portion of the balance as outstanding when it no longer is!  I wrote about this practice recently. Read more about it here: Why Does Capital One Screw People Who Settle Their Debt.

It is as important now as ever before for people to take responsibility for policing the accuracy of their credit profile. No one else is going to do it for you.

If you find inaccurate, erroneous or out of date information – You Can Fix It!

You have the ability to dispute bad information with the reporting agencies and you can also send direct disputes to the furnisher of the information. If they do not correct the discrepancies after sending your dispute certified mail return receipt it may be the best use of your time to next consult with a skilled consumer law attorney.

There are not that many attorneys experienced with FCRA violations around the country, but a case they may bring can be filed in federal court, which may make speaking with one you find with an office outside of your state worth the effort.

To locate an experienced FCRA consumer attorney you can go to www.naca.net and search using your zip code to find one nearest you.

Two attorneys I know that specialize in this area are:

Jason Rapa in PA

www.rapalegal.com

Michael or Justin Baxter in OR

www.baxterlaw.com

If you have a specific question about debt or credit, click here to post your question and get it answered.

If you have questions or feedback about this topic, feel free to participate in the comment section below.

Media Contact:

Ken Luck

(336) 553‐1804

kluck@rlfcommunications.com

Debt Relief Companies Form New Consumer Advocacy Organization

Raleigh, N.C. (Feb. 9, 2011) – In an ongoing effort to raise standards in the debt relief industry and improve consumer protections, a diverse group of leading debt relief companies have formed a new organization devoted to consumer advocacy. The organization is spearheaded by Steve Rhode, aconsumer advocate and founder of the website GetOutofDebt.org. Membership is by invitation only to companies who promote transparency and have a demonstrated track record in properly helping consumers address financial hardships.

The American Association of Credit Counselors (AACC) will include nonprofit credit counseling agencies, debt management companies, debt settlement companies and other providers who are focused on serving consumers in financial distress. The AACC name reflects the revival of an organization that existed with a similar mission but has been defunct for more than 20 years.

This is the first debt relief association formed solely to find collaborative ways to work for the betterment of consumers rather than to lobby on behalf of the industry.

“We’re not an official association, we’re not a traditional industry group that anyone can join as long as they are willing to pay the membership dues,” said Rhode, one of the most vocal and active advocates for consumer interests. “We’re really a club, a club that only accepts the best companies who’ve demonstrated a commitment to the highest standards in serving consumers and who want to work collaboratively to protect consumers facing money troubles.”

All member companies in the AACC have agreed to a set of common standards, including:

• • Charging no upfront fees for debt settlement services;
• • Providing customers with good faith estimates before they enroll in any debt relief service;
• • Outlining the potential risks of a debt settlement or debt management program in easy‐to understand language;
• • Providing openness and transparency regarding performance results; and
• • Making top management readily available to their customers.

The group has adopted the motto “Putting Consumers First.”

“We are thrilled to be a part of this group, which is really focused on creating educated consumers and campaigning for their rights and protection,” said Chris Schornak, president of Debt Solutions Network, one of the founding members. “There are a wide range of debt relief options out there, but not every option will work for every individual. It’s exciting to see a group of companies standing up and saying that education is more important than deception and that the needs of the consumer are more important than a company’s bottom line.”

The genesis of the organization came out of an event Rhode hosted in late November called “A Group Conversation about Restoring Truth to Debt Relief.” The day‐long meeting brought together heads of debt relief companies, consumer advocates and regulatory agencies to discuss ways to improve consumer protections while still making debt relief services available to those in need and explore ways to increase the credibility of legitimate debt relief providers.

“That meeting created some great conversations among various debt relief providers about ways to better the industry as a whole and to make services from credible providers more readily available to consumers,” said Rhode. “Those discussions have continued over the last few months as these companies, while competitors, have found they have common interests and a shared vision for improving the industry. They felt there would be strength in numbers and have decided to work together for change.”

Charter members of the organization are:

• • Active Debt Solutions, a Florida‐based company that offers credit counseling, debt consolidations, bankruptcy referrals, and debt settlement programs;

• • Cambridge Credit Counseling , a Massachusetts‐based nonprofit that offers financial education and debt management services;

• • CareOne Services Inc., a Maryland‐based company that offers credit counseling, debt management and debt settlement programs and bankruptcy referral services;

• • Consumer Recovery Network, an Idaho‐based company which provides DIY instruction and offers debt settlement services

• • Debt Solutions Network LLC, a Michigan‐based company that offers debt settlement and debt consolidation services;

• • New Era Debt Solutions, a California‐based company that offers debt settlement services; and

“We take great pride in being part of a group that puts consumers first,” said Alex Viecco, vice president of New Era Debt Solutions. “This is something that has been lacking in this industry for a very long time.”

The original AACC was created in 1955 and disbanded in the 1980s.

About the American Association of Credit Counselors

The American Association of Credit Counselors was founded with the mission of “Putting Consumers First” in debt relief services. Membership in the organization is by invitation only and all of the members have agreed to meet specific standards and principles in offering their services. The AACC has eight members. For more information, visit http://newaacc.org/.

Not all are created equal.

Watered Down Content Sites

Some personal finance web sites have a great deal of exposure and publish a ton of material.  Some content heavy sites  barely scratch the surface on a particular topic because they are geared toward mass appeal. In other words, the more “milk toast” the message, the more reader applicability.

I can think of several really big sites with content updated daily, but that allow no interaction with their readers through open commenting. These sites also tend to have a lot of ads. Milk toast (bland) content with lots of web traffic to sell ads. Not a fan….

Informative & Innovative Sites

On the other side of the spectrum you have web sites with good content and large readership that allow and encourage comment participation. Some of these also have community forums that are a great place to learn even more specifics into a particular aspect of debt and credit.

One of the sites that I like and have frequented for several years is www.debtconsolidationcare.com. I in fact post in the forums on that site anonymously as time permits.

The DCC site offers many great self help tools and feedback for debt relief with a focus on debt settlement, debt management, dealing with debt collection, what you can do to repair and improve your credit, debt consolidation and more. Big fan….

I have connected with the site owner Vikas on several occasions. One of things that so impressed me about Vikas and his motivation and vision for the DCC site – his focus on providing free, or affordable resources for consumers who are already struggling financially. His goals are similar to what I endeavor to provide here on Debt Bytes and through my company, Consumer Recovery Network.

Over the years that I have participated by commenting in the forums at the DCC site, I have witnessed many people use the site as a resource for their own debt relief efforts very effectively and who then continue posting their experience and sharing with others long after their own personal financial storm had passed – Paying forward the help, feedback and support that was available to them.

The Debt Consolidation Care community is a stand out, as are other sites that I will cover in the future.

I encourage Debt Bytes readers to check out the DCC site and to openly participate when there.

In their “PAST DUE” report, I found some of the most pro consumer recommendations for amending state and federal collection laws I have seen to date. Here are some of the key recommendations the report suggests should be adopted in order to better protect consumers and lessen the drain on publicly funded court resources:

The FDCPA and parallel state fair debt collection laws must be expanded so that the list of required “baseline” items also includes: (6) a statement explaining the consumer’s rights under the FDPCA; (7) the name of the original creditor, whether or not the consumer requests it; and (8) an itemization of the total principal, interest, fees and other charges that were added to the debt:

“Baseline” Information (currently required)

1. Amount of debt;

2. Name of creditor;

3. Statement re: assumption of debt validity in the absence of a dispute;

4. Statement re: if the debt is disputed the debt collector will “verify”; and

5. Statement re: upon written request the collector will provide name of original creditor if different from current creditor.

Recommended Additional “Baseline” Information

6. Statement notifying consumers of two significant rights they have under the FDCPA;

7. Name of original creditor; and

8. Itemization of: total principal, interest, fees and other charges that have been added to the debt.

The report recommends additions of items 6 though 8 to the already required baseline protections found in items 1-5. While I see recommendations 6 and 7 as good, I really like number 8! It is of major importance that there be an opportunity for consumers who find themselves in a position to effectively bounce back from past financial setbacks be able to do so with a correct measure of what they legitimately owe.

There needs to be an accurate accounting of what the true balance of debt is, rather than what are all too often highly inflated and sometimes bogus fees.

The report further identifies what is dubbed “Baseline Plus“recommendations:

The FDCPA and parallel state fair debt collection laws should also be amended to require that debt collectors make a good faith effort to retain certain “baseline plus” information to the extent possible. A debt collector should be required to provide all “baseline plus” information it has to the consumer within five days after their first communication. Courts should also require that all available “baseline plus” information be attached to any complaint in a debt collection lawsuit:

Recommended “Baseline Plus” Information

9. Proof of indebtedness signed by the consumer;

10. Date that debt was incurred and date of last payment;

11. Chain of title if debt has been sold;

12. Original debt;

13. Each payment credited to the debt;

14. Each fee and charge added to the debt;

15. Each payment credited against those fees and charges;

16. All other debits or charges to the account; and

17. Explanation of the nature of those fees, charges, debits, and all other credits to the debt, by source and amount

Item 9 will be hard to come by if asking for a wet ink signature due to the prominence of electronic acceptance of terms and internet applications for credit.

Numbers 10, 11, 12, 14 & 17 would certainly put the nail in the coffin of most zombie debt that exists today. It would also crimp the reselling of portfolios of bad debt that had already been sold at least once prior to the enactment date of  any future legislation that includes these, or similar provisions.

None of this is a bad thing.

The report discusses the drain on court resources around the country resulting from debt collection lawsuits that are filed mill style and shows how the collection of unsecured debt has its own “robo signing” issues similar to the well published woes of foreclosure mill law firms across the country. Past Due is well worth the read.

Amendments to the FDCPA are still some time away.

If some of the “Plus” lines found in the report from Consumers Union make it into the amended federal collection laws, I predict the following:

• Fresh charge off debt portfolio values will increase to highs not seen since 2005
• An end to lawsuits filed mill style
• A bit of shrinkage in the number of debt collection shops that will continue operations
• Traffic to some of the more whacky web sites about “How to beat a debt collector with Debt Validation” will drop dramatically
• Debt buyers will adapt their portfolio performance goals and move to sue sooner after purchase than later

I believe that most of the suggestions found in the CU/EBCLC report will not only lead to better consumer protections, but also create better recovery  performance at legitimate companies operating in the collection space.

When you work with consumers who are trying to recover from financial struggles of the past or present for any significant period of time you can honestly say; the vast majority of people want to pay their obligations. You should certainly be able to do so with dignity and confidence that you actually owe the debt, are not paying too much, paying the right party and are able to put the debt behind you for good and move on with your life.

If you need professional assistance in dealing with past due bills, be sure to connect with debt relief service providers that are members of the AACC. AACC member companies are committed to putting you and your goals first. Click here to find an AACC company you can speak with: American Association of Credit Counselors

Debt Bytes welcomes your participation in discussing this important topic in the comments section below.

Mish has a post up today: Food Stamp Usage Up Nationally

It shows my state of Idaho having the largest year over year increase in residents receiving food stamps, or what is now referred to as SNAP. SNAP stands for: Supplemental Nutrition Assistance Program.

Reading the post was timely for me, as you will understand in a moment. After reading some of the comments to the above linked post by Mish, I was motivated to post a comment of my own.

I am writing this post and sharing the contents of my comment with readers of DebtBytes because many may not know the policy we at Consumer Recovery Network adopted to help feed those who often go hungry inside the communities of many of our customers across the nation.

Here is the comment I left:

“I have been reading Mish for years and assume this post is intended as a real time representation of deflation.

Reading the comments (and the fact that I am really hungry right now), prompted me to add to the discussion.

Today my family is participating in “Feel the Hunger“.
I made my daughters each a 1/2 cup of rice before school. It’s all they get to eat for the whole day. My youngest ate 2 tbls prior to leaving and took the rest with her. My oldest held off from eating any, but took the full 1/2 cup with her.
All I can think of right now is bacon…

There are many locals in my small North Idaho town participating.

This is a good learning tool for my daughters.

There are local answers to hunger, but they depend upon the participation of those better situated.

The work I do at my company focuses on assisting mostly middle class families in financial turmoil. For those suitable to use the approach we advocate, we provide a good alternative to bankruptcy (mostly alternative to chapter 13). Our fee since opening our doors for any direct hands on service is wholly contingent upon our success. In over 20 states we do not collect the fee, but still provide the service. In lieu of collecting the fee we encourage our customers donate the calculated fee to low income legal aid in their area, or to their local food bank in the form of nonperishable food items.

We are not a nonprofit. We like profit as much as the next guy, but we keep our fees low and our results and retention high. Our reputation is exemplary in an industry known to scam and leave people in a lurch.

We do the work we do, the way we do, for a myriad of reasons.

We do not advertise, as the cost would be borne by our customers who are not in the best position to fund higher fees. We mostly rely on word of mouth and organic exposure.

My point: Be part of the solution when and wherever you can.

Man… I could go for burger right now…”

The people we help here in Idaho and in Mish’s state of Illinois are included in that list of over 20 states where we encourage donations to those in need.

I will cover why we designate low income legal aid offices as donation recipients in a later post.

Companies like Consumer Recovery Network exemplify, in our chosen unique way, good corporate citizenship. If you have the ability, next time you stop for groceries, consider picking up a few extra food items and drop them off at your local food bank.

Oh, and if you happen to be in Sandpoint Idaho, I could go for a bacon cheeseburger right now….

Double Oh, check out Mish’s blog. He gives a rip about the state of economic affairs in this country.

The term “charge off” describes an accounting function followed by your lenders. When speaking of revolving consumer credit card accounts, a charge off occurs when the credit issuer either chooses, or must, recognize an unpaid loan balance as a loss.

For lenders, losses are bad news. The bad news gets reported and can affect anything from loan loss allowance/reserves, securitization, liquidity, even solvency.

Because of the bad news nature of a charge off, your credit card issuer will generally wait until the maximum time allowed to charge off your unpaid debt. The time frame for your creditor to recognize the loss on your unpaid credit card balance is outlined in Generally Accepted Accounting Principles (GAAP) and is typically 180 days of consecutive nonpayment, or what the Office of the Comptroller of the Currency (OCC) has designated as “seven zero billings”. There will be instances where charge off will seem to occur at 210 days of nonpayment.

Most lenders will wait as long as is allowable to take the charge off hit to their books, but they can take the hit earlier than 180-210 days. It’s just not a common practice.

What does this mean to you?

While charge off is an important accounting function for lenders, it is also a major event that applies to, and will affect, the efforts of a consumer who is experiencing financial difficulty.

While you are trying to navigate your inability to pay all of your debts and when evaluating the different debt relief options available to you, understanding the timing and affects of your accounts charging off will give you a needed advantage in your planning and timing.

The period leading up to, during, and after a charge off of your unsecured debts will impact:

• Debt collection efforts with your original creditor
• Debt collection with outside collection agency
• Debt Purchasing and subsequent collection efforts
• Debt Settlement/Debt Negotiation
• Credit Reporting
• Debt Management Plans
• Risks of being sued on unpaid debt
• Biting the Bullet and Filing Bankruptcy
• Delaying a Bankruptcy

Each one of the bullet items above are deserving of a separate article and will be posted on debt bytes as I complete them. If an above bullet is a click-able link, it will lead to coverage of that topic individually.

If you would like to speak with a pro for free to discuss your specific situation and what you may be able to do to deal with it, Click: Free Consultation Request. You will be contacted by a CRN specialist who can assist you in identifying your options and next best steps related to pre or post charge off debts.

Fee Caps

This came on the heels of federal rules announced the prior week that are designed to curb consumer abuse at a national level. Illinois went further than the FTC by capping fees. Companies providing settlement services can only now charge 15% of savings.

A 15% of savings fee, after the work is performed, is precisely what we at CRN have charged since 2006.

We support Illinois efforts to reign in companies’ business practices that have often been found to be a source of harm rather than help for consumers.

The new rules in Illinois did carve out an exemption for attorneys. This is unfortunate, as many of the companies that have been shut down in the past, have used the attorney business model. Some of these attorney led companies (whether in fact or in name only) are well documented to have created worst problems for the consumers they solicit for their programs.

Here is a quote from the Illinois AG:

“Turning to a debt settlement operator to help you pay off your credit cards is like turning to a cinderblock to help you learn how to swim,” said Attorney General Lisa Madigan. “Debt settlement operators take money from consumers and usually provide them with no services. With this new law, which is the toughest in the nation, Illinois sends a clear message to debt settlement operators: If you want to do business in Illinois, you have to provide real services to help consumers pay off their debts.”

Madigan’s comment is just as relevant when working with many attorney models that are mass marketed to the public by affiliate sales people.

I would encourage any Illinois consumer looking for outside assistance to settle their debt, locate a company who will charge no more than 15% of savings. Anything over that, and you are paying too much!

If you would like to learn more about how CRN may be able to assist you: Schedule a consultation, call us at 1-800-939-8357, or start by submitting a question.

Yesterday, the FTC announced important changes to the Telemarketing Sales Rule, http://www.ftc.gov/opa/2010/07/tsr.shtm. The changes are intended to protect consumers with too much credit card debt from abusive debt settlement practices. One of the most important changes is that settlement firms will no longer be able to charge consumers up-front fees to settle their debts as of 10/27/10.

Overall, I am thrilled that the FTC is reigning in abusive debt settlement firms. For too long, these firms have been allowed to prey on consumers with too much credit card debt. Sadly, in far too many instances, consumers who worked with such firms saw their financial situations grow worse, not better, because of the large up-front fees they had to pay, and many of those consumers eventually ended up in bankruptcy.

The rules will shape the industry and promote the best practices moving forward.

I am concerned that some settlement firms may charge a large fee at the back end of their work for consumers. I have always contended that the fee amount charged by a debt settlement service provider directly correlates to how long it will take an individual to be successful in settling all of their debts. Program duration is directly attributable to increased risk of aggressive collection efforts such as filing lawsuits against a consumer in order to collect.

When consumers are looking into debt settlement as one of the few legitimate options available to deal with crushing debt, it is IMPERATIVE that they still weigh the COST for the service.

I will be posting more detailed comments about the amendments soon. Stay tuned!