It what certainly feels like yet another self-serving action by the credit card industry, Bank of America, Capital One, Citi and Discover Card, as well as the payments networks MasterCard and Visa have launched a new website HelpWithMyCredit.org that misleads consumers.
What appears to be even worse, is that a CNN personal financial reporter that I normally respect, Gerri Willis, has fallen for the trap. See CNN.
The website promotes itself as a banking industry effort to assist consumers that are struggling with debt problems. It even provides a self-help section that allows visitors to answer questions and guide themselves towards an appropriate solution. But what you don’t notice, until you look closely, is that the site simply guides consumers to credit counseling groups, and makes no mention of bankruptcy. The credit counseling groups specifically recommended on the site are Money Management International, Novadebt and Take Charge America, along with the networks of the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies.
I cringed when I read the site, for me, it is a strong and open reinforcement that the relationship today between credit counseling groups and credit card companies, is self-serving at best and truly deceptive at worse. What concerns me most is that consumers are being lead to believe that credit counseling is a legitimate solution for them at large, with no mention that credit counseling groups are compensated, by banks, by a percentage of the money the credit counseling companies collect from consumers and return to the banks.
If this credit card industry was truly interested in assisting consumers with their debt situation, instead of simply directing people into the hands of only one self-serving solution, credit counseling, in the interest of balance and fairness, there would be equal information provided about bankruptcy or even lump-sum debt settlements as a legal and viable option. There is not. What are we to deduce from that glaring omission?
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
Do you have a question you'd like to ask me for free? Go ahead and click here.
I have just gone through this, but did not have enough to settle. They will not settle with you while you are still making payments – you have to go delinquent 6 months and basically ruin your credit rating before they will offer to settle with you for 25% or so. Makes no sense but that’s how it works. That’s how BofA does it at least. Mean time they will be calling 5 or more times a day with no federal law I am aware of to stop it – fair debt collection law only covers collection agencies.
Have your 25% ready when they mail or fax a settlement offer, have it reviewed by a lawyer to make sure the remainder of the debt cannot be sold or assigned to a collector. You will then owe taxes on the forgiven balance.
I have approx $115K in cc debt and the cc co’s have started to raise the interest rates to 18 – 29% which is making it impossible to handle the monthly payments – basically forcing me to become delinquent and incurr additional fees/costs – I have $40k in savings that I could/would like to use to settle the $115K. I’m not past due yet but it will happen w/in the next 30-60 days. is there anywhere i can get good/accurate info on how to do lump sum settlements?
thanks
I have just gone through this, but did not have enough to settle. They will not settle with you while you are still making payments – you have to go delinquent 6 months and basically ruin your credit rating before they will offer to settle with you for 25% or so. Makes no sense but that’s how it works. That’s how BofA does it at least. Mean time they will be calling 5 or more times a day with no federal law I am aware of to stop it – fair debt collection law only covers collection agencies.
Have your 25% ready when they mail or fax a settlement offer, have it reviewed by a lawyer to make sure the remainder of the debt cannot be sold or assigned to a collector. You will then owe taxes on the forgiven balance.
you only owe taxes if your net worth is positive at the time the debt is “forgiven”… by IRS rules, if your net worth is negative, you are insolvent, they don’t impute “forgiven” debt as income to insolvent folks. At least that’s the way the rules were a few years ago when they applied to me. Check and see if that rule is still current.
I really like this website a lot, but I’m still a little confused.
I get that the banks involved are operating in their best interest in the areas of credit counseling, but that doesn’t really surprise me (and I don’t totally blame them — if I were to lend someone money and they were to struggle with payments, I might not be inclined to go out of my way to suggest bankruptcy).
I realize that bankruptcy and lump sum payments are options, but I also still feel an obligation to “keep my word” (even if this was a deal with the devil). Going with the credit counseling service sounds like the best way to do that.
Am I missing something? I have about $125,000 in credit card debt and although I currently have no lates, I’m probably 60-90 days away from a LOT of lates (and the subsequent snowball effect of fees, etc.) due to a loss of a huge portion of my work (self-employed). I’m super-super-super-stressed and want to do the most moral, but realistic thing. Shouldn’t I try to do the consumber counseling with Novadebt, et al first? I thought that was required before you can do bankruptcy anyways (I’m in California).
I did just get a modification on my mortgage that brings it to a realtively realistic level (for where I live in California at least!) so I’d like to keep my house for my family, even if my credit is shot for a while.
Also, I have about $35,000 in IRAs. Will those be liquidated with credit counseling and/or bankruptcy.
Thanks so much for the free advice!
DS,
Thanks for the comment.
I think the difference her is that you are applying emotion to a situation that your creditors only apply profit potential.
I certainly understand the issues of keeping your promises and doing the moral thing. But at what cost? How much do you need to punish yourself and do you have a greater responsibility to fix the past, or the future?
One critical point people don’t see is that you can still go bankrupt and do the right thing. There is nothing to prevent you from repaying your debts after bankruptcy. Bankruptcy gives you options that credit counseling never will. It gives you an immediate fresh start, the protection of law, and the opportunity to build a safer financial life now, not six years from now.
You can go bankrupt without credit counseling.
In bankruptcy your IRA is protected from creditors.
Here is an interesting previous post for you to read. “If Bankruptcy is Immoral and Against Religion or God Then Why Did the Jesuit Priests of Oregon Just File Bankruptcy?”
If you instead applied the same detached business logic to your situation you would come to the conclusion that bankruptcy offers you the most protection and the ability to meet your emotional needs.
Do me this one favor, please. Find a local bankruptcy attorney you like. Make an appointment and go in and meet face-to-face. After talking with Novadebt and a bankruptcy attorney you will be better informed to make a decision that is right for you.
Big hug.
Steve
P.S. Here is an excellent post from a bankruptcy attorney who is also a minister. You should read it.
Steve,
I applaud you for bringing this ‘contorvesial’ subject of CCS to the foreefront.
One item that your article did not mention is the percentage of people who go to CCS for help but are turned away for one reason or another.
Courtney Kostelecky
Founder DebtFreeNews.com