In today’s economy, Americans have struggled to make a decent income or keep their jobs at all, a situation several Western New Yorkers can sympathize with. Despite this sympathy, there are an abundant amount of large corporations in the Buffalo area that seem to be profiting off the economic misfortunes of others and, surprisingly, the culprits are the debt collectors that promise to help us out of debt in the first place.
Why we turn to them:
The debt collectors target middle-class and lower middle-class individuals who, as a result of unemployment, have relied on credit cards for day to day survival, like groceries and gas. These bills add up and an individual panics about how to pay off his/her debt, but then a glimpse of hope appears on the T.V., “Reduce your debt up to 50%!” and “Be debt free in 2-4 years!” What is overlooked, however, are the little tiny almost invisible asterisks hanging above these claims that if you look at closely enough reveal the true nature behind these corporations: “Settlement percentages exclude program fees. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time.”
How they get us:
According to the New York Times the collectors instruct clients to, “set up special accounts and stock them with monthly deposits while skipping their credit card payments. Once balances reach sufficient size, negotiators strike lump-sum settlements with credit card companies that can cut debts in half.” As promising as this may seem, they leave out details like how debt collector fees can reach 15-20% of the original credit card balance, whether or not the company is successful in reducing your debt. Worse yet, these advertisements fail to mention the strong possibility of credit card companies suing to collect the original debt and clients not having sufficient funds to settle because of the debt collector’s sky high fees. After constant harassing phone calls, not only to consumers but also illegally to family members and employers, most clients have to claim bankruptcy, a solution they were trying so hard to avoid in the first place.
What’s being done:
CEOs of the debt collector industry are pointing the blame in all possible directions. They claim that it is all a smear campaign by banks(the real enemy), that there are a few bad apples that ruin the whole image of debt collectors, and even at clients themselves for not being dedicated enough to finish the program! The public will not stand for it. Since 2004 at least 21 states have brought enforcement actions against debt relief companies and a cap on fees as well as a consumer protection agency has been proposed by the Federal Trade Commission and within Congress. Additionally, Attorney General Andrew M. Cuomo recently announced a law suit against several Western New York debt relief companies for harassment. Of course the same is not true for all debt relief agencies—some may actually provide relief, but if you find yourself in tough situation have the company thoroughly explain their terms and review your rights before taking any action.
*Written with assistance from Merika Wilson