C writes:
After spending a year (one of the worst of my life) working at a debt settlement company, I feel that I am obligated to warn as many consumers as possible about how badly you can ruin your financial situation by using one of these companies. My new job is at an all natural bakery, I no longer wish to swerve my truck into a tree on the way to work. Debt settlement is the process of eliminating your debt by ceasing payment to the creditor, and then negotiating with the card companies or collection agency to pay less than the balance owed. The debt settlement company charges a rather hefty fee for this service; however, the consumer should be saving money on the deal because they are paying significantly reduced balances to clear their debt. This is how it is supposed to work. This is not how it usually works.
The clients at the company I worked for ranged from lower class/blue-collar workers who were unable to find jobs, and had mounting medical bills to upper-class white collar workers who had incomes upwards of $9k a month, stay-at-home moms and college students. Some clients were only in $8,000 of debt, and some were upwards of $100,000. Their reasons for accumulating debt ranged from sick children and unemployment to simple avarice.
Our program was designed to eliminate a client's debt in 36 months or less. The client would pay our fee, which was based on the amount of debt they were in, over a period of 12 months. At the same time they contractually agree (a contract I will elaborate on) to save a certain amount of money, so that when the time comes to arrange a reduced pay-off of their debt (usually 50% off of the owed amount), the money would be available, and the transaction would be complete. This sounds like a logical process, and when described to a potential client it is alluringly simple, convenient and quick. The sales person will convince the client that they will somehow be able to save money in their own accounts, and pay our fees for a year. It is nearly impossible for the client to save money due to the heavy fees. Other debt settlement companies will set up a savings account within their company, and the client is obligated to put a stipulated amount into savings every month. If they miss a month, they are canceled with no refund as per the signed contract. There were clients at my company whose income was only $900 a month, who were being asked to save $400 a month, and then put $200 a month towards the program's fee. The program demands that the clients save and spend unrealistic amounts of money for their incomes.
The "client service agreement", which I referred to as a "contract with Satan", confounded most clients.
The contract is written in legal rhetoric that most people wouldn't comprehend, but would end up being persuaded to sign anyways. The average client is not educated about credit reports, FICO scores, and legal vocabulary, so a sales person could easily talk them into the program. The contract actually states that the company is not responsible for any negative repercussions due to their enrollment in our program. It also stated we could cancel a client without refund at any time (which happened a few times in a year), and that if a client cancelled we were still due our year's worth of fees no matter what. Money that we were practically guaranteed because we drafted directly from the client's checking accounts. No person in their right mind would sign this contract if they understood what it meant.
Our sales team and client liaisons ensure clients that if they withhold payments from their creditors, our representatives will effectively negotiate with the creditor, and all will be well. Yet, it states in the contract that our company does not interfere with the creditor/client relationship, and does not instruct clients to cease payment to the creditor.
Many clients had their wages garnished, had liens put on their property and their credit ruined because of not making payments to their creditors. The company was covered by our air-tight contract. If anyone client threatened to see a lawyer my boss would throw the signed contract in their face, and dare them to seek legal council. Usually when a client had finished paying our fees they couldn't afford a lawyer anyways.
I worked in administration while I was at this company. My boss (the owner of the company) made around $17,000 a month from people in debt. Side note: I was only paid $14 an hour, with no benefits, no sick days, and of course no paid vacation. I also felt miserable every day of my life there. My boss was ridiculously petty, money grubbing, and in my opinion he was the definition of a pig. He is the type of person that would sell-out their own grandparents for an extra few dollars. Although, I wasn't one of the employees that were talking people out of their hard earned money and financial security, I felt sickeningly guilty knowing I was working at a place that basically stole from people. My fellow employees and I fielded calls all day from angry clients that weren't paying the reduced balance to their creditors that they were promised at enrollment. Interest charges and late fees pile up on unpaid accounts, so that by the time a 50% pay-off is reached, the client is paying almost what they originally owed. We also had irate clients calling about wages that were garnished and complete harassment by phone from their card companies. My boss refused to take any phone calls, although he was the main decision maker, other employees who were supposed to be client representatives did their best to avoid phone calls because they were sick of being yelled at, or hassled. Getting help from the people who were supposed to be giving it is impossible at this company, and I'm sure it is equally difficult at similar companies.
Here is a short list of thing that horrified me while working there:
- A client was convinced to let their vehicle get repossessed. The sales person told them that while it was secured debt, they couldn't deal with it, but if it was repossessed they could negotiate. Repossession stays on a credit report for 10 years, and can ruin a FICO score.
- A client with a terminally ill child had their wages garnished, although they were promised this would not happen. They were refused a refund, and lost the $3,000 they spent on the company's fees and were still in a huge amount of debt.
- A client that angered my boss was cancelled without refund after paying around $1800 for the service. My boss didn't like how the client spoke to him.
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I could go on for several pages about all the things that were horribly wrong and unethical that I witnessed alone.
If there is a debt settlement company out there that is truly helpful to the consumer, I'm not aware of it.
The old saying "If it's too good to be true, it probably is" is absolutely right. If a company is promising anything that seems beyond reason, they want your trust and then your money. The sales team at our company made a pretty decent commission rate from enrolling new clients. They will usually say whatever the potential client wants to hear, so they get that sweet bonus at the end of the month.
If you are in debt there are a few things you can do that are helpful. If your credit score is decent you can usually negotiate a better interest rate or payment plan with the creditor. Always pay more than the minimum balance if possible because often only 1-2% of the payment is going towards the principle balance. If you pay off a card do not close the account, it's best to keep it open and occasionally spend and pay off a small amount every month. Avoid debt-consolidation. Debt-consolidation is a process where a client pays one large payment, which accounts for all of their debt, to a company that then distributes the payments to the creditors. This process takes 4-7 years to complete, the payments are large and usually carry an interest rate or fee, and 70% of people that use debt-consolidation are in worse debt within 2 years of the program than they were before they started. Avoid bankruptcy, it is on your credit report for 10 years and it is a question you answer for the rest of your life. If you are already behind on your payments, and you have a reason for financial hardship such as unemployment, illness, some sort of disaster, you can often negotiate a reduced balance on your own. If a credit card company does not receive a payment for longer than 6 months, they will often accept up to 50% less than the owed amount, although you normally need proof of financial hardship.
The best advice I can give to get out of debt, is to pare down to the essentials. Sell some of your stuff, only spend money on necessities like essential food/gas/doctor's visits, if you rent and you can break the lease get a cheaper place, getting a roommate is always an option, don't be above getting a second job if it's possible. A lot of clients were in debt because they couldn't resist the siren call of a plasma screen TV, or a few new things at Banana Republic. They also drove cars that were beyond their income, and they couldn't resist eating out a few times a week. If you are motivated you can get out of debt on your own, it won't be easy, fun, or quick, but you won't risk getting screwed over worse than you already are.
- Original here
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Tyco, wound up in the Mid-State Correctional Facility in Marcy, New York, after (among other things) skipping out on his taxes. The company is taking no chances with chairman and C.E.O. 
