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U.S. Laws on Debt Settlement Companies Could Change the Industry

All the noise US lawmakers had been making in recent months about what they consider debt settlement abuses led companies to get innovative by creating new approaches to debt consolidation plans. Technology and better education leads to debt settlement solutions which leave borrowers and lenders satisfied, if not entirely happy.

This article is going to discuss the standard debt settlement plan and why certain politicians and pundits were set to end a whole industry which obviously grew up because of a public need. I’ll talk about debt negotiation methods and whether credit card debt consolidation works. Then I’ll point out a couple of nonprofit debt help companies which are coming up with innovative new approaches to trimming individual and household debt. So let’s take a look at the past and present industry.

Debt Settlement Companies and Upfront Fees

Repo Men and Debt Settlement Firms

Debt Settlement Firms Would Have You Believe Credit Card Companies Are Like Liev Schrieber’s Character in Repo Men, But Most Aren’t.

One strategy when you work with a debt settlement companies is to make payments to a savings account. When a certain amount of money is built up, the debt settlement company takes this cash to your creditors and offers to pay off a larger percentage of the debt. Lawmakers have called for an end to all upfront fees and an investigation by the Government Accountability Office found a few instances in which companies took exorbitant fees out of the savings before paying off the debt.

What isn’t always stated is that this was a few of 20 different leading companies, so the percentage is small of the services who did this. What also isn’t always mentioned is that the Consumer Credit Rights Campaign, which acts on behalf of a coalition of debt settlement companies, has agreed to caps on fees. Ending upfront fees would put many of the consumer credit counseling companies out of business, leaving consumers and debtors to deal with the credit card companies and their debt collector flunkies all by themselves. The fees collected aren’t like those credit lawyers collect, so they businesses need constant revenue streams.

How Consumer Credit Counseling Works

Consumer credit counseling agencies offer good services. You enroll in their program for a small nominal fee. You pay them a certain amount of money each month, then they pay off your bills while working to lower your interest rates and have penalties waived.

When you decide to hire a consumer credit counseling agency, look for certification that looks something like this: 501(c)(3) nonprofit. You might also see the words “ISO 9001:2008 certified organization” following the 501(c)(3). This means these nonprofits are certified and don’t just say they don’t collect profits.

Responsible Debt Relief Institute

The Responsible Debt Relief Institute is a non-profit organization founded by the ex-director of the Rochester Institute of Technology Center for Consumer Financial Services, Robert Manning. Mr. Manning has developed an algorithm which helps him calculate the amount of debt a person or family can repay. This helps borrowers and creditors come to more equitable debt settlement resolutions.

In just two years, the RDR Institute has become a leader in consumer finance innovation. Not only does the RDR offer its consumer debt capacity assessment software, but it also uses educational programs to enhance the ability of debt management and debt resolution service providers build better partial payment plans.

Every year, more borrowers find they simply don’t have the money to pay off all their debts. They don’t want to file for bankruptcy, but that quickly becomes their only realistic option.

Finding solutions that helps creditors forgive debt, while still getting repaid a fair amount, helps people on both sides of the debt equation.

The Responsible Debt Relief Institute now has a number of services and customized programs. These services help housing counseling agencies, loan underwriters, loan portfolio management companies, debt relief assessors, credit counseling agencies, mortgage modifications experts, management consultant project leaders, and even credit union program directors.

AAA Fair Credit Foundation

Another nonprofit organization helping with the credit crisis is the AAA Fair Credit Foundation. AAA Fair Credit helps with certified credit and debt counseling like so many of these other companies, offering a comprehensive analysis of a household’s entire financial situation. But you’ll also find they can handle reverse mortgage counseling, HUD-certified housing counseling, and mortgage default counseling. You also might look into their ConsumerCents financial education program. Their publications and seminars gives you the know-how to buy homes and cars with confidence, deal with identity theft, rebuild your credit score, and avoid foreclosure.

The AAA Fair Credit Foundation also launched a statewide collaborative program in Utah which helps people build “Individual Development Accounts”. IDAs are matched savings accounts which help you invest in the kind of assets that increase in value in the future. These assets include post-secondary education and training, developing small businesses, home ownership, and assistive technology devices. The UIDAN seminars for individual development accounts require 8 to 10 hours of financial management and life skills training before applying. You’ll learn a whole curriculum, including financial records tips, basic investment training, money management techniques, budget development plans, consumer education, and the wise use of credit. Their basic tenets are “Save, Learn, and Earn”.

Debt Settlement Leaders of the Future

Organizations like the Responsible Debt Relief Institute and the AAA Fair Credit Foundation are launching new approaching to the debt industry. The white hat credit counseling services understand their industry works best when people on both sides of the debt ledger find a way to win. Debt settlement creativity leads me to have hope we can come to a solution that leaves the industry in place, but leads to a more equitable way of managing that industry.

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