The most contested  measure anticipated in the new rules is a ban on companies charging upfront fees. Upfront fees have been held up as necessary by the majority of debt settlement companies who have lobbied heavily to maintain the status quo. Consumer advocates and regulators have argued that upfront fees are the equivalent of an abusive business practice. We, at CRN and Debt Bytes, agree! Which is why CRN fees for full service debt settlement have always been based on SUCCESS, after the creditor is paid.

Stay tuned to Debt Bytes, as we will be covering the impacts of these changes in the coming weeks.

For Immediate Release

July 28, 2010
**MEDIA ADVISORY FOR TOMORROW**

FTC Chairman to Announce a New Debt Relief Rule to Protect Financially Distressed Consumers at Middle Class Task Force Event

WASHINGTON – Tomorrow, Thursday, July 29^th, at 1:30 PM ET, Federal Trade Commission Chairman Jon Leibowitz will announce a new rule to protect consumers of debt relief services at a Middle Class Task Force event at the White House. Following the Chairman’s announcement, Vice President Biden will discuss the administration’s consumer protection agenda and the importance of consumer protection to middle-class families.

This event will be POOLED for TV cameras, and OPEN to print, online, radio and still photographers. An RSVP is required to participate.

WHAT: FTC Chairman to Announce a New Debt Relief Rule to Protect Financially Distressed Consumers at Middle Class Task Force Event

WHO: Vice President Joe Biden, Federal Trade Commission Chairman Jon Leibowitz

WHEN: Thursday, July 29, 2010, 1:30 PM ET

• Gather time: 1:00 PM ET at the White House stakeout location
• Camera pre-set: 12:30 PM ET

WHERE: Eisenhower Executive Office Building, Room 430

RSVP: Press who wish to cover this event should RSVP to press@ovp.eop.gov by tomorrow, Thursday, July 29, 2010 at 8:00 AM ET. **Press who DO NOT have a White House hard pass should include their Date of Birth and Social Security Number. All press must enter the White House at the Northwest Gate.**

I was editing the FAQ page today over at CRN (long overdue) and needed a break. I called a friend of mine who is quite knowledgeable and active with all things consumer debt and asked him for suggested additions (I hope to get him over to debtbytes for some guest posts in the future).

He emailed a brief list. I may later put some of these up on the CRN FAQ, but for now I needed another break from updating the new CRN site. Writing and editing site content knowing it is more focused on corporate image and branding can be a bit tedious. The debt bytes blog is where we at CRN can let our hair down a little (those of us that have much).

Anyway, here is the list of additional questions he sent me and my responses below each:

• Do I have to sign an agreement to use your services?

• Can I see it without giving up personal information?

All CRN members must complete and submit a Membership Enrollment Form prior to purchasing even our basic educational materials. Why? There is some pretty powerful stuff in there about getting out of debt, improving your attitude about money, planning for your financial future etc… Not everyone is ready for this stuff! There is just a little bit too much “truthiness” to it all. Someone could get hurt!

You can definitely see the agreement prior to speaking with us by downloading it from our web site: Debt Settlement Truthiness Purchase Form

• What are your fees?

CRN Full Service Settlement Fees are currently 15% of what we save you – AFTER we save it. There are costs for our materials. We refer to this cost as membership fees. Membership fees are fully credited against any future success based settlement fees as an offset. Rather fair, if I may be so bold…

You even have a limited and life time refund policy! Check out the Truthiness Form for all the details!

• How do I know you are legit?

There are a myriad of ways to check us out and compare us to other companies offering debt relief services:

1. Length of time in business.
2. You have many mainstream media articles and radio interviews about us which you can find links to on our press and media page.
3. Regulatory participation encouraging measures be taken to curb abuse in the debt settlement industry.
4. There is no shortage of members who have shared their experience working with us by writing to CRN. The CRN site has many customer quotes alternating throughout the pages.
5. We are also starting a new way for people to share their experience with us by having a testimony blog post here at debt bytes. This is where people can share openly and unedited (unless they use harsh profanity). How do you know those quotes are real? If we faked it and got caught it would be false and misleading advertising. We have a record of all. What if I am just saying this to get one over on unsuspecting consumers? Well, I just admitted to knowing it would be false and misleading to do so. That would be like…. fraud or something.
6. You have the BBB – Consumer Recovery Network has an A – Folks, that’s not easy to do in this industry!
7. Also, Google (not to leave out all the other fine search engines out there – but I did) the name of any company you want to research, add a plus sign (no spaces), then add the words scam, complaint or review. Like this: Consumer Recovery Network+Review

I am sure there are more ways to complete your due diligence. You could call my mom, for example.

• How do I know I can trust you?

This is a HUGE question! This is especially important given the track record of many companies offering debt settlement and the massive amount of negative media coverage surrounding the industry. The CRN business model is designed to build your confidence in us as well as the product & service we support – from day one. We will earn your trust.

• Why should I listen to you?

• Aren’t you just trying to sell me something?

You should listen to what our specialists have to say when we do a consultation with you because you could avoid making a huge mistake! One of which might be trying debt settlement on to see if it fits – this would include working with us!

We do have a product for sale. We do have services you pay for AFTER you see and like the results.

We DO NOT have sales people!

Our Specialists you consult with can often be found discouraging you from going down a path that would involve working with us – thereby paying us anything. I personally deter more people from trying to avoid bankruptcy through debt settlement than I encourage into it.

That’s a free service by the way, those consults. If you feel the consult was of value and are thankful, please consider donating a bag of non perishable food items to your local food bank in return. We know times are tough for you, but there are those for whom times are even tougher.

For those of you reading this post that have already talked to a debt Settlement company (or you call one later); call them back and pose these questions. They may not have as much fun answering them as I have.

If you have a question for us, you can click on ASK CRN (and get mostly serious answers too). And, as always, your comments are welcomed below! Break’s over. Back to work for me.

Edit: Merriam-Webster
truthiness (noun) – 1 : “truth that comes from the gut, not books” (Stephen Colbert, Comedy Central’s “The Colbert Report,” October 2005)

You are Invited…

…to share your story, feedback, and/or review of your experience working with Consumer Recovery Network in the comment section of this post.

There are no rules for posting. You may want to follow an outline of what brought you to CRN, how we compared to other options or companies you looked into, what happened along the way, and what the ultimate result of working with us has been, to date. Or, just have fun and express yourself!

ALSO:

Not everyone we consult with qualifies for our more aggressive approach to dealing with debt. Many of you we consult with still appreciate the time we take to inform you of what debt settlement really involves after having contacted other service providers. Our consults are often a refreshing dose of blunt honesty for people just looking for information and answers they can trust. You are invited to share too!

Tell you what….if you having anything to share about CRN, the Debt Bytes Blog, or any facet of the work we do…. chime in! We look forward to hearing from you!

P.S. You can identify yourself using your initials or first name only, unless you are comfortable sharing your identity, like Jonathan Grossman, who blogs about his experience with CRN at Debtsettlementstory.com

I was interviewed by the reporter for the story as was a CRN member who was quoted in the article. The article gave some good advice, but I would like to expand on it.

The article correctly stated many companies “have taken outrageously high upfront fees — as much as 13% to 20% of your debt”. The average fee charged by most settlement companies is 15% of the debt you ask them to settle for you.

The CRN member quoted in the article settled $35,000.00 of debt for $12,000.00 by implementing the tools and following the guidance she received as a CRN member.
Had she hired a typical settlement company to settle her debt she would have paid an average of $5,250.00 in upfront fees. However, as the Detroit Free Press article stated, she paid CRN just $1,200.00 to do the same thing. Would it really have been the same thing though? Not hardly!

If you hire the typical settlement company you’ll find:

• By paying high upfront fees before the company achieves any real substantive results for you, you are prolonging your success, and often dramatically reducing your odds of achieving any success at all.
• The company will probably send notices to your creditors letting them know they are now working with you. This means the creditors will know that you are now paying a settlement company instead of them. Often, the reaction to this information will be to become more aggressive about collecting what you owe them, possibly by referring your account to a law firm in your area earlier than it would otherwise and giving the firm authorization to sue for the money you owe.
• The settlement company will generally not be negotiating with your original creditors because they mostly wait for your accounts to charge off. Charge off usually happens at about 6 months of nonpayment. Once creditors charge off bad debt, they will typically do one of three things with your account, assign, sue or sell.

Settlements are still available when your account goes someplace other than with your original creditor after charge off, but depending on who your creditors are, you’ll save the most through debt settlement by negotiating with the original creditor before the account charges off. In other words, you could find yourself paying more, sometimes much more, when settling with a 3rd party.

The article in the Detroit Free Press seems to suggest that the CRN member was still hoping debt settlement would work for her by saying “She’s crossing her fingers that this arrangement works.” It did work. She enrolled with CRN in September of 2009 and completed her settlements in March 2010. She got out of debt in 6 months rather than the 3 to 5 years it would have taken her to resolve her debts if she had filed for chapter 13 bankruptcy instead or the average of 4 to 5 years if she had enrolled in a debt management plan.

CREDIT REPORTING

Debt settlement is an option for someone who can no longer continue making timely payments on their debts and who’s credit score is therefore either already suffering or soon will be.

What happened to the credit score of the CRN member quoted in the above linked article?

The CRN member gave me permission to share an excerpt from an email exchange I had with her on 3/22/10:
“…Two days ago, I re-ran my credit and 3 of the 4 settlements had already posted. My credit was already 671-677 from each of the three bureaus! I think my credit ranged from 670-710 in the year prior to starting the settlement process so this is amazing.”

The effect of debt settlement on an individual’s credit score will differ based on several factors, so please do not take the experience of this CRN member as an indicator of what will happen to yours. The points here are: Getting out of debt should be your first priority, and once you do, your credit will bounce back regardless of the option you choose to get out of debt.

The US economic engine is based on roughly 70% consumption. In a tough Michigan economy, this CRN member and her family can return to responsible spending in 6 months rather than 3 to 5 years. Furthermore, not only did she avoid bankruptcy, but also, her creditors got something rather than 90% odds they would have gotten nothing were she to have filed chapter 7 bankruptcy.

If you find yourself running out of money before you run out of month and live in Michigan (or anywhere in the US for that matter) check out Consumer Recovery Network when you are researching debt settlement as one of your 3 legitimate options to deal with debt.

Michael Bovee
CRN President

I do not often post on consults I do. This one from about six weeks ago provides both warning and sound advice.

A gentleman in Indiana called in to the toll free line here at Consumer Recovery Network after hitting our website while researching debt settlement. I answered the call and proceeded down a list of general things I ask during a typical debt consultation.

He had already spoken to a representative of a NY law firm after hearing a radio commercial advertising services to reduce debt. He felt he had a pretty good foundation of what settlement was. As I started to lay out some facts about debt settlement, he started to lay out a little confusion. His confusion is a direct result of things that were not covered in his consult with the representative of the law firm.

The end result of the consult I did was that he now knew about the knock on effects of settlement and that it should only be considered as an alternative to bankruptcy. He recognized he was not close to bankruptcy, but did have a need to get out of debt. During the consult he recognized he could quickly sell 2 cars he was not using for under blue book and pay off his credit cards.

I heard from him the next day.

Being the considerate type, he had called the law firm rep after speaking with me, to inform him he would not need to enroll in his program. The rep (obviously the consummate closer) tried to overcome his objections and continue to sell him on settlement.

He told the rep that he did not want late payments reported on his credit report for the next 7 years. The rep told him “Oh, that’s only for corporations”!

He told the rep that he was not willing to risk being sued. The reps response was “Well… I suppose it could happen, but you would be the first”!

First what? First person the rep lied to that day? This guy exemplifies what is wrong in the industry! He should be answering his telephone with “Thank you for calling the Bib-N-Fib. Can I take your order?”

I could tell my car selling buddy thought I would be shocked to hear that someone was so willing to deceive in order to make a buck. Instead, I shocked him when I informed him it came as no surprise at all. I did tell him that I was highly skeptical that the representative that he was speaking with was an actual employee of the law firm. The rep was likely just a sales guy at a call center where callers from radio and TV ads are funneled, and whose only purpose is to sell callers on settlement so they can get paid a commission. Even if they have to lie, omit or deceive to do it!

I don’t think car guy would have gotten the same nonsense if he called the law firm directly.

The point of this article:

Consumers should only speak to the actual service provider they would work with. Any middle man has one motivation and that is the commission. Some are far more artful in their selling techniques than who car guy talked to (let’s hope most), but why would you need to speak with anyone other than who you are going to work with? You wouldn’t.

If you are looking into bankruptcy and have a consultation (do more than 1), you are speaking to the attorney or an employee of the firm on their direct telephone line or standing in the office.

If you are looking into a debt management plan offered through consumer credit counseling, you are speaking to the counselor or an employee of the agency on their direct telephone line or standing in the office.

Why in the world should you look into a settlement company any other way? You shouldn’t.

There are thousands of places on the internet offering a consultation to see how they can help you get out of debt. There is a daily bombarding of radio and television commercials offering debt help. The vast majority have no direct connection to the company that will actually be providing you a product or service.

If you hear from whom ever you are speaking to that they are going to “refer” you to the best, most reputable this that or the other thing, your talking to a sales guy. He or she gets paid by selling to you and will not be working with you after you start. They often have no accountability to the actual service provider.

ALWAYS start at the source!

I cannot identify one exception to this. Can you?

Your Credit Scores Less Than Filing for Bankruptcy

FICO, the company that calculates consumers’ FICO scores — the scores that are the most widely used by American creditors to determine whether or not they will extend credit to a particular consumer and the terms of that credit — recently released data showing how different negative actions consumers might take in regard to their credit will affect their scores. Among other things, the data shows that settling your debts is far less damaging to your FICO scores than filing for bankruptcy. In other words, the data helps make the case for why settlement rather than bankruptcy is an excellent alternative for many cash-strapped consumers, assuming that they either settle their own debts or work with a reputable settlement firm that charges fairly for its services.

The data released by FICO and available on its web site at: http://www.myfico.com/crediteducation/questions/Credit_Problem_Comparison.aspx, shows that as a consequence of filing for bankruptcy, consumers may see as much as a 240 point drop in their FICO scores. In contrast, if they settle their debts, their FICO scores may drop by 125 points at most. Interestingly because of the way that FICO scores are calculated, when consumers have higher scores prior to either filing for bankruptcy or settling their debts, their credit scores are harmed more by settlement or bankruptcy than are the scores of consumers who had lower FICO scores to begin with. According to FICO, the reason for this difference is that the scores of lower scoring consumers already reflect their credit missteps.

Despite the FICO data, I must caution you not to base your decision about which debt relief option to pursue based on that information. All debt relief options — credit counseling, settlement and bankruptcy — will have a negative effect on your credit histories and/or FICO scores for some time. (See my recent blog, Debt Relief Options vs. Your Credit Score).

When you are deciding how to deal with your debt, your primary concerns should be gaining a clear understanding of how each option works and its pros and cons, and determining whether the numbers associated with a particular option make sense for you. For example, your first test if you are considering settlement should be whether or not you can accumulate the money you need to fund your creditors’ settlement offers before your risk of being sued by them for what you owe begins to escalate. If you cannot come up with the money you need to settle your debts relatively quickly, then bankruptcy is probably your better option.

For free help determining which debt relief option would work best for you, fill out CRN’s consultation request form.

is Frustrating and Bad for Consumers

Sure, there are exceptions, but I’ve found that most media run the other way when it comes to covering debt settlement. They seem completely unwilling to get educated about do-it-yourself settlement options and about ethical debt settlement firms like CRN, that provide debt-stressed consumers with a valuable service and charge them fairly for that service, unlike most debt settlement firms. Instead, they either ignore debt settlement or they paint debt settlement firms with a broad brushstroke, characterizing every firm in the industry as a rip off.

Not only is this characterization unfair to those members of the settlement industry that truly want to help consumers get out of debt, but it’s also unfair to consumers who are burdened down with debt and looking for a way out. If they work with the right firm, debt settlement can be a great solution for many of those consumers. Yet, most media reports scare consumers about settlement and warn them to steer clear.

With countless consumers struggling to deal with mountains of debt and with the consumer bankruptcy rate on the rise, the media is doing consumers a disservice by not providing them with fair and balanced information about debt settlement. By fair and balanced I mean:

• explaining the goal of debt settlement

• detailing when settlement is an appropriate option and how it compares to other debt management options

• educating consumers about how to settle their own debts and the resources available to help them

• telling consumers how to chose a reputable debt settlement firm

• warning consumers about the warning signs that a firm is not on the up and up

So, I am issuing the media a challenge: Get informed about debt settlement! Understand how it can (and should) work and who it’s right for, warn consumers about the bad firms, and inform them about the good ones. Under the right circumstances, debt settlement can be a great option for consumers and every bit as legitimate an option as debt consolidation, working with a credit counseling agency or filing for bankruptcy. So, it’s time for the media to inform consumers who are drowning in debt that there is another option available to them — debt settlement.

Here are common examples of the kinds of misleading blather I read in the alerts that show up in my e-mail box each morning:

• Press releases that supposedly are announcing news about a particular debt settlement firm or some aspect of settlement. In fact, the releases contain no news content of any sort and are being used by unethical firms to get consumers to click through to their web sites. At least one of the wire services transmitting these “press releases” appears to be little more than a vehicle for posting articles on the web and not a true wire service at all.

• Poorly written articles about settlement with titles that have been chosen to make it appear as though the articles actually provide valuable advice and information to consumers who need help managing their debts. In fact the information in these articles is marginally useful at best and sometimes totally misleading. You’ll find the real purpose of these articles in a closing paragraph where readers are encouraged to contact a debt relief network, which the articles claim is comprised of highly ethical settlement firms with proven track records for helping consumers. Don’t believe it!

• Half-written blog posts about some aspect of debt that are surrounded by lots of ads for debt settlement firms. I assume that the agenda of whoever writes these posts is less about completing the post and providing readers with truly useful advice and information and more about getting readers to click on one or more of the ads.

• For-profit debt settlement organizations that use names to make them sound like they are non-profits or that imply that they are affiliated with a federal government debt settlement program. The theory here is that consumers will be more apt to trust a non-profit or a firm that’s affiliated with the government. Fact: Debt settlement firms are businesses, not nonprofits, and there is no federal debt settlement program.

• Articles, blogs and press releases encouraging consumers to visit specific debt settlement forums before choosing a debt settlement firm. Supposedly, consumers who participate in these forums will have an opportunity to communicate directly with other consumers who are working happily with a debt settlement firm or who have already settled their debts with the help of a particular firm. Although there are legitimate forums where consumers can obtain truly useful information, some forums have been created by debt settlement firms or their representatives and if you participate in one of them, the consumers you communicate will be nothing more than people who are being paid by the firms to share information with you, to gain your trust and to recommend the firms to you. Other forums work a little differently. For example, in some of them, someone will try to get you to provide him with your name and e-mail address and then that individual will sell your information to a debt settlement firm. Not long after, the firm will contact you offering to help you resolve your debt problem.

Obviously you must be very, very careful when you search for debt settlement assistance online because there are a lot of firms out there who are willing to use underhanded and misleading tactics to gain your trust and who are all too ready to promise you the moon, take your money and give you little or nothing of real value in return. Therefore, before you share any information with anyone on a debt settlement forum, before you agree to work with any debt settlement firm or to pay the firm money, check it out with the Better Business Bureau, http://www.bbb.org/us/Find-Business-Reviews and with your state attorney general’s office, http://www.naag.org/attorneys_general.php. In other words, when it comes to debt settlement the old adage caveat emptor, or buyer beware, definitely applies.

Michael Bovee

Despite advertising to the contrary by some debt settlement companies, you are well-positioned to settle your own debts with your creditors. In other words, there is no need to pay a lot of money to a debt settlement firm to negotiate for you, and doing it yourself means that you’ll have more money to put toward your debts so you’ll get out of debt faster. However, you’re more likely to settle your own debts successfully if you have a clearer understanding of the settlement process and know how to make it work for you. For these reasons, the services of a debt settlement firm that will support your do-it-yourself efforts with information, advice and encouragement can be invaluable. If you decide to get this kind of help, here is some of what you will learn:

• Something is almost always better than nothing. Although creditors understand that a certain percentage of the consumers they extend credit to won’t be able to repay what they owe and therefore set aside a reserve for losses as a result of defaults, they also want to minimize the amount of those losses. One way that most of them do that is by agreeing to settle past due debts for less than the full amounts owed. However, each creditor has its own policy regarding what it will settle a debt for. For example, you may find that you are able to save 60% with one creditor, but only 45% with another. For more detail read Debt Settlement-Why Banks Do It.

• Timing matters. The creditor you’re negotiating with may reject your offer, maybe because it’s too small, in which case you may want to increase the size of your offer, if you can afford to. It’s also possible that your offer was rejected because you’re off on your timing (See the next bullet in this post) or because there was irregular activity on your account prior to your default. For example, before you stopped paying on the account you tapped it for large cash advances, used it for balance transfers, or you suddenly began using your card much more than you had in the past. Of course, some creditors may simply refuse to settle with you, in which case you’ll have another shot at settling if your account is sent to collections or sold to a debt collection agency.

• Settle sooner rather than later. If you are going to negotiate with an original creditor (the creditor who extended you credit), usually you must do so before the account you want to settle is more than six months past due. Otherwise, you’ll have to try to negotiate a settlement with the collection agency that your creditor may hire to collect your debt or with the agency that may purchase the debt. It’s also possible that after the six months are up, your creditor will give your debt to an attorney who is authorized to sue you for the money. Complexities do exist. The more accounts you have with different creditors the more strategic you will need to be in how you prioritize the accounts so that you maximize savings and defer risk.

• Be ready to roll with the punches. Although settling a debt is not difficult, when you are doing it yourself, you may end up feeling lost, frustrated or unsure about what to do next. That’s why having the support and assistance of a debt settlement firm can be so helpful. Not only will the firm make sure that you understand the details and nuances of the process and provide encouragement and support when you need it, but it will also be available to help you figure out when you should take a dive and when you ought to throw your best punch.

Consumer Recovery Network provides consumers with all of the information and tools they need to settle their own debts as well as unlimited support throughout the settlement process. We also guarantee that if you don’t want to settle your own debts or try and are unsuccessful and hire us to do the negotiating for you, we will charge you for our efforts only if you accept the offers we get. And, if you do, we don’t expect you to pay us our fee until after you’ve paid your creditors what you agreed to. Furthermore, in 19 states we don’t charge anything for our negotiating services. In these states however, we do encourage the consumers we work with to donate what they would have had to pay to us if they were living in a state that did allow us to charge a fee for those services to a low income legal aid organization in their community or to donate nonperishable food items to their local food bank.

By: Michael Bovee

CRN President

Banks in the process of lending, know that a percentage of accounts will not perform, meaning some accounts will default and go unpaid. There is a multi-billion dollar industry built around the known fact that not everyone will be able to repay their debt. This collection process is centered on a lenders effort to “lose the least”. The tools and mechanisms in place for this “lose the least” effort are by and large, predictable.

Once an account becomes seriously delinquent, the odds of ever being paid another penny on it decrease dramatically. Creditors have the option of accepting less than the balance in satisfaction of the entire debt, or drop the account into the collection pipeline and see what they get on the other end. This pipeline consists of 3 options, assign, sue or sell, or what I jokingly refer to as A-S-S.

I could write several chapters on each of these collection pipelines, but the purpose of this post is to focus on the math your creditor has to work with when you are unable to pay them.

Assigning your debt:

Assignment collectors are companies who, on behalf of the creditor, are attempting to collect on unpaid balances. Generally, whatever they collect, they are paid a percentage. Credit card issuers will grade the performance of those they assign debt to and will continually award collection files to the best performers, the companies who get them the most money. Assignment of debt also has different tiers. You may be contacted by one debt collection company for a few months, then a different one after 90 days, and even another one 90 days after that. The collector’s job is to get as much as they can for their client, the bank, and to secure the best return for themselves on their performance based fee. Assuming the collector is able to collect 50%, the creditor may see a return of as much as 35% of the assigned balance. This number is a moving target, and will likely be different per account, per portfolio, per tier, per creditor.

Being sued to collect your debt:

Creditors select accounts for immediate referral to law firms in order to collect. Some law firm’s collection attempts will be very similar to an assignment collector where the firm is paid a performance fee just like assignment collectors. Others may start off with that appearance, but will then begin legal process in order to collect. Attorneys who sue in order to collect will generally add legal fees to the final judgment amount. Most law suits for unpaid credit card debt go uncontested and default judgment is entered against the debtor. The judgment itself is a piece of paper, but with legal enforcement implications that allow for collection of the debt via lien, levy and garnishment. Being sued in order to collect has its own costs that will vary, with no guarantee the judgment can be collected on. For your creditor, this means higher cost’s with an unknown return (rest assured the return as an aggregate justifies the expense enough to keep this part of the pipeline in tact-otherwise it would no longer be supported).

Selling your debt:

There are different tiers of debt sales. Your account can be sold several times and will have a different value at each sale. I want to focus on the sale done by the original creditor, who you opened your account with. Five or so years ago, while attending a collection industry seminar, I sat down briefly with a VP of risk management for the now defunct WAMU, who told me at that time, WAMU was catching bids of 15 cents on the dollar for freshly charged off debt (that number was consistent with the daily updates I was seeing from industry newsletters I receive). Charge off generally means the creditor is no longer expecting to be paid and is recording the debt amount as a loss. That was then and this is now. In the current economy, portfolios of charge off debt are being bid at 8-9 cents.

When your debt is purchased, the buyer will then subject the accounts it purchased to the A-S-S principle described above. The buyer has risked their capital with an expectation that they will be profitable by making an ASS of themselves. Sorry, couldn’t help myself.

Historically, the percentage of non-performing credit card assets has been low, less than 5%. In today’s economy, that number has skyrocketed to all time highs. Default on mortgage debt, commercial debt, revolving unsecured consumer debt (credit cards) are all approaching, or have surpassed any prior precedent.

Focusing on unsecured credit card debt; how has all this affected settlement? Well, look at the math. Your creditor will often “lose the least” be reaching agreements with those in serious delinquency before they drop it into the collection pipeline. This is why settlement works, whether 10 years ago or today.

With these increased portfolio losses at all time highs, banks would prefer to work with the consumer in order to lose the least. Consumers, whose financial situation suggests settlement is a good option to pursue, will find by working directly with their creditors they will often be in the position to save the most.

There are a few of the larger card issuers with whom the best savings will not be achieved until the account is placed with outside collection, but for the most part, reaching an agreement with the original creditor is in the best interest of the bank and the consumer. It is why our focus at CRN is to design an individualized plan that will get our members out of debt in the quickest way possible. Yes, our approach is one of the most aggressive in our industry. We are the crash diet of debt reduction.

To learn more about how you can drastically reduce your debt weight; visit Consumer Recovery Network.

By: Michael Bovee

CRN President