Canadian Finance Blog
Canadian Finance Blog |
| Posted: 02 Apr 2011 02:00 AM PDT The total debt per consumer in Canada increased 5.6% in the last year -Source. After the recent FTC ruling in the United States (which prohibits debt settlement servicers to charge a fee unless a debt is altered, restructured, or settled), it's no surprise that many companies are looking elsewhere for less a regulated turf. In the U.S., the debt settlement industry was regulated primarily because of deceptive marketing practices. Many companies were misleading the consumers and making implied promises to reduce their debt. To make matters worse, an upfront fee anywhere from 4-6% was nothing out of the norm. As we take a look at the debt settlement market in Canada, we can already see some patterns. After doing a simple Google search for "Debt Settlement In Canada", I stumbled across this website:
There are a few things on this website that raises some red flags. First, they claim that they can get you debt free in 3 years. Implied promise? They also claim that they can reduce your credit cards by 40-60%. What if some creditors won't work with debt settlement companies? I've seen some cases where creditors will only offer a 20% reduction (Discover). In 2009, the Texas Attorney General filed a lawsuit against CSA (Credit Solutions of America) for their deceptive marketing practices. According to the state, "…CSA purported to offer a debt settlement service that would eliminate its customers' unsecured debt in as little as three years." -Source Due to the recent influx of debt settlement companies in Canada, the BBB recently issued a warning about debt settlement companies -Source. I'm not saying debt settlement is a terrible approach to pay off your creditors. As a matter of fact, debt settlement can be a very effective way to pay off your creditors a fraction of what you owe and finally become debt free. So how do you know which debt settlement company isn't here to just take your money? 1. Transparency- Make sure they are fully disclosing all their fees. What are their monthly fees (if any). Are there any escrow account fee? 2. Oversell- Many debt settlement companies will "sugar-coat" the program. They will tell you everything you want to hear and make the process sound painless. If they are only telling you the benefits of the program, they most likely aren't the most reputable company around. 3. Licensed & Regulated – In British Columbia, companies must be licensed by the Consumer Protection BC. Also check with the BBB to see their track history. 4. Give me Proof- If a company is stating an average settlement rate of 30%, ask them to validate their claims by showing proof of successful settlements in the past 5. Cancellation Policy- If the company is taking advance fees; always check to see what their cancellation policy is. Be wary of companies who have a strict cancellation policy if no service is provided. Lastly but not least, always check to see what your other debt relief options are. As mentioned, debt settlement is only effective for those who are best suited for it. There's a more detailed article here that will teach you how to choose the best debt settlement company. Before enrolling with any companies, be sure to check that they are always giving you the right guidance. Author Bio: Kevin is a writer for www.debteye.org. Debteye is a place where you can get unbiased opinions on anything related to personal finance. Kevin previously owned a debt settlement company prior to joining the DebtEye team. He is a a certified debt specialist and also works with credit counselors across the nation Related Posts:
Debt Settlement in Canada originally appeared on Canadian Finance Blog on April 2, 2011.
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