In the last few years I have done several consultations with consumers that were considering enrolling into New Era Debt Solutions for assistance in negotiating their debts with creditors. One thing that I have noticed pretty consistently is that consumers are confused as to the amount of fees that New Era Debt Solutions actually charges their clients.  Part of this confusion comes from the fact that sometime toward the end of 2008 or the beginning of 2009 New Era changed their settlement fee from 33% of the amount that they saved their clients to 15% of the total debt enrolled. (high fee, typical of most companies in the industry)  

Another reason for the confusion is that even though New Era charges their fee on total debt, it is charged at the time the accounts are settled as opposed to upfront and before settlements are reached. Charging fees at the time of negotiations as opposed to upfront like most settlement programs is a much better situation for consumers.  However, because the fees are charged at the time of savings, many consumers mistakenly believe that the fee is 15% of what is saved as opposed to 15% of total debt. Considering that this fact could double what a client believes the actual fees are, it is imperative that clients understand this difference.

More on New Era Debt Solutions Review

"If you tell a lie that's big enough, and you tell it often enough, people will believe you are telling the truth, even when what you are saying is total crap." - Richard Belzer

This is the 4th in a series of 5 articles aimed at educating consumers on what I believe to be the true motivations behind The Association of Settlement Companies (TASC).  If you have read my previous 3 articles, you have likely come to the same conclusion that I have. Contrary to what debt settlement salespeople claim, TASC is not a consumer watch dog at all, and in fact, many of their member companies are some of the most egregious offenders when it comes to ripping off consumers.

If TASC is not really an industry regulator and consumer watchdog, then why are most consumers under the impression that they are? Simple, brilliant marketing and dare I say it "propaganda."  

Think about the simplistic brilliance of TASC from a marketing standpoint.  A group of debt settlement companies get together to More on TASC - Just Another Marketing Gimmick

Unfortunately this is going to be an all too common headline in the coming months.  With Debt Settlement companies ripping off consumers at an alarming rate, the FTC and state regulatory bodies are taking notice and stepping up enforcement.  Debt Relief USA recently filed for bankruptcy citing several investigations by state attorney generals and federal authorities as the reason for closing their doors and filing bankruptcy.

Why were they being investigated?  Because they were doing what most debt settlement companies are doing. Ripping off consumers!  Charging large fees upfront, stretching out client programs for 4 years, misleading consumers, getting them sued and not providing the promised services among other things.  

So this is great news for future consumers that will not be able to fall victim to Debt Relief USA.  What about their current clients? Well unfortunately they got screwed.  In a letter from the Texas Attorney General sent to each current and former client of Debt Relief USA he states:

"IF YOU ARE A CURRENT DEBT RELIEF USA CUSTOMER (the company was holding your “set-aside” funds in order to settle your debts): The Texas Attorney General is working with the Chapter 7 Trustee to ask the Bankruptcy Court to refund your “set-aside” funds to you as fully as possible. Because of the limited funds in the estate, it is unlikely More on Debt Relief USA files Bankruptcy - Clients get Burned

I was recently on a consultation with a consumer and she asked me to review a contract that she received from Debt Settlement USA.  She had enrolled into their program a few months ago and now she was starting to get the feeling that they were much more interested in collecting their fees from her than they were in helping her settle her debts.  After 5 months in their program she had given them around $2500 in fees and as a consequence didn't have much money at all to even settle her smallest debt.

I told her that I had heard of Debt Settlement USA, but with over 2,000 or so Settlement Companies out there, it is easy to get them confused. I informed her that this sounded like the typical high upfront fee shenanigans that most Debt Settlement companies hook consumers into. I didn't have a copy of their contract on hand so she faxed it over, to get my opinion.  When I received the contract, unfortunately my hunch was confirmed.

More on Debt Settlement USA - A Not So Glowing Review

As an aside to the 5 part series that I am writing on the Association of Settlement Companies, I wanted to provide a simple way to understand the thinking behind the formation of TASC as I see it.  Sometimes it is very difficult to explain interwoven thought processes in the confines of a 1000 word article.  Hopefully this will help consumers understand why (in my opinion) TASC currently has nothing to do with legitimately protecting consumers and everything to do with protecting themselves.

The following is the story of TARF - The Association of Red Foxes.  (Creative I know)

Pretend we are on a big farm, and on this farm we have some chickens… ei, ei, o, with a… Ok if I didn't write it you would have thought it :-).

So, on this farm we have some chickens, some brown foxes and some red foxes.  The chickens are the American Consumers and the foxes represent debt settlement companies.  The farmer who will represent the regulators and the farms will be the different industrys. We are on the Debt Settlement Farm.  The farmer on this particular farm is content to let the chickens fend for themselves against the foxes as long as the number of chickens killed is relatively low.  

Things on the farm are ok, short of some chickens getting eaten here and there, life moves forward.  As time passes, foxes from other industry farms hear about how easy the pickins are over at the debt settlement farm. These foxes have been driven from their farms because they were More on TARF - The Association of Red Foxes

Currently the FTC is considering a proposal to Ban the large upfront fees that most debt settlement companies charge.  USOBA - The United States Organization for Bankruptcy Alternatives, recently submitted testimony to the FTC that such a ban could put up to 84% of their member debt settlement companies out of business.    
USOBA is a trade association for the Debt Negotiation Industry.  They claim membership of about 200 debt settlement companies. Since most Debt settlement companies incorporate a similar advance fee structure as many USOBA member companies, I think it is a fair assumption to assume that their numbers could hold relatively true for the entire industry.

While this may seem like good news to consumers at large, it will be devastating news for More on Debt Settlement - FTC could put 84% of Companies out of Business!

We have now established that TASC is first and foremost a trade organization for the Debt Settlement industry and its number one goal is the protection of its own member companies.  In this article we will examine whether or not TASC can protect consumers at the same time it is busy lobbying to protect its members.  

I believe the answer to this question is that Yes, they can protect consumers, however, they fail miserably.  TASC claims to protect consumers, but a cursory look at the organization and how it operates makes it clear, at least in my opinion, the consumer protection claim is simply window dressing to benefit their own self serving interests.

I know I am certainly going to ruffle some industry feathers with that one.  However, as I stated, that is simply More on TASC - Debt Settlement Lobby or Protector of the People?

One might wonder what is motivating me to write a series of posts dedicated to The Association of Settlement Companies (TASC).  I must confess that it is in part for the selfish reason of saving myself some time.  One of the core principles behind the founding of Damon Day and Associates was to first and foremost educate consumers, by providing honest and straightforward financial advice as it relates to all of the options available for getting out of debt.  

At least a few times a week I am asked by a consumer to recommend a good Debt Settlement company that is a member of TASC.  My typical response is, "ok, out of curiosity, do you know what TASC is and what it does?"  Long pause… "Um, actually no, I do not. Can you tell me what TASC is?"   Then I spend the next 5 or 10 minutes explaining what debt settlement salesmen do not.

Most consumers are under the impression that TASC is some sort of government regulatory organization, which it is not.   TASC member companies proudly display their TASC logo badges on their website and tell consumers that More on The Association of Settlement Companies - TASC - An Introduction

I started writing this article a number of months ago and it has sat collecting digital dust until some recent events at the FTC caused me to pick it back up. My intent is to provide a perspective on a Debt Settlement industry organization known as The Association of Settlement Companies (TASC).  

I will tell you right up front that my perspective will be very different than the one you will get from a salesman of a TASC member company.  

With the aim of providing specific and detailed information, it quickly became apparent that More on TASC - The Association of Settlement Companies - A Closer Look

Debt Consolidation is a popular term thrown around quite a bit in the context of getting out of debt. According to google the term debt consolidation loan or some variation of the phrase is searched for over 10 million times a month.  The ironic thing is that in this current economic climate, a secured debt consolidation loan is very difficult to get and an unsecured debt consolidation loan is all but impossible to obtain. 

I have heard people use the term debt consolidation to talk about home equity loans, signature loans, balance transfers, consumer credit counseling, even debt settlement.  For the purposes of this article, when I refer to debt consolidation or a debt consolidation loan, I am speaking specifically about borrowing money to pay off other debts and consolidate them into one new payment.  Consumer credit counseling and debt settlement are not debt consolidation loans, even though people sometimes mistakenly use that term to describe them.

During the housing boom we couldn't turn on the radio or the television without More on Unsecured Debt Consolidation Loans - Do they still Exist?

More and more states are cracking down on unscrupulous Debt Settlement firms that charge consumers hefty fees before performing a service.  Calling debt settlement “a rogue industry” that gives strapped consumers false hopes while socking them with high fees, New York State’s attorney general, Andrew Cuomo, has announced an investigation involving numerous companies in the field.  Cuomo has recently issued Subpoenas and launched investigations into 15 Debt Settlement companies.  The complaints where initiated mainly because of consumer complaints that Cuomo has received from New York residents about these firms over the last several years.

The following firms all received Subpoenas from Cuomo's office:

1.  American Debt Foundation Inc.
2.  American Financial Service
3.  Consumer Debt Solutions
4.  Credit Answers L.L.C.
5.  Debt Remedy Solutions L.L.C.
6.  Debt Settlement America
7.  Debt Settlement USA
8.  Debtmerica Relief
9.  DMB Financial L.L.C.
10. Freedom Debt Relief
11. New Era Debt Solutions
12. New Horizons Debt Relief Inc.
13. Preferred Financial Services Inc.
14. U.S. Financial Management Inc. (operating as My Debt Negotiation)
15. Allegro Law.

Keep in mind the Attorney Generals office has More on Debt Settlement - 15 Companies under Investigation in New York

The Debt Snowball method to paying down debts has been around for a long time but it has become popularized and almost synonymous  with Financial Planner and radio personality Dave Ramsey.  Although from a financial standpoint, Dave takes a little different approach in how he recommends the debts be ordered, he praises this approach as a simple and straightforward way for people to dig out of debt.  If you are unfamiliar with the Debt Snowball approach and how it works, please click the link to read my post about the Debt Snowball method and how to apply it.        

Now that you have an understanding of what the Debt Snowball Method is, when does it make the most sense?  
A Debt Snowball Method makes a lot of sense if you: More on Debt Snowball - When does it make sense?

Credit Solutions of America is another of a long line of Debt Settlement companies currently in hot water with State Attorney Generals throughout the Country for unfair and deceptive business practices.  As is almost always the case, the unfair and deceptive practice stems form the structure and the amount of fees charged to consumers upfront.  In the case of Credit Solutions of America, after 17  months in their program, nearly 50% of client payments would actually go toward their fees.  (What a Deal huh)

Sure this information might be disclosed in the contract, but as with most of these programs, the telemarketer/salesman that talked the consumer into signing up, likely didn't spend much time explaining this aspect of the program.  Instead they tend to focus on telling the consumer how blissful their life will be once they start making payments to them.  It usually isn't until 6 months down the road, that the consumer realizes, none of the promises are coming true and most of their money has been stolen in upfront fees by the settlement company.  That is typically when the complaints reach the Attorney Generals Desks.

Credit Solutions has also been sued by the Attorney Generals in Texas, New York and Missouri as well,  alleging essentially the same deceptive practices of charging in full for services that they do not always perform.

The BBB Reports over 1700 consumer complaints in the last 3 years agains Credit Solutions of America and gives them an F Rating.


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AZfamily.com reported today the story of Rosie Stewart who found herself in $175,000 worth of credit card debt after her business fell victim to the economic downturn.  Like many people she turned to a debt settlement company that was big on promises but short on results. Essentially she paid this company Ram Financial Services over $12,000 dollars and received nothing but a lawsuit form one of her creditors.  

Incredibly when she contacted Ram about the lawsuit, she was told that the entire $12,000 that she paid them went toward their fee and nothing went to settle her debts.  To further add major insult, they also added that she still owed them another $8,000 before they would negotiate with her creditors.  

As you can imagine, she was furious and demanded a refund.  Their response was More on Debt Settlement Nightmare for Phoenix Woman

Help!!!! I am on information overload.  Can you look at my financial circumstances and tell me exactly what debt reduction strategy will make the most sense for me?  

Sound familiar?  You are not alone.  Thousands of people ask this question every day and set out on the Internet looking for the answer. Unfortunately instead of honest and unbiased advice they typically encounter salesmen that focus more on convincing consumers to buy into their various programs than they do on educating the consumer about the best options available.  

In order to help consumers from falling victim to a good sales pitch that is pushing the wrong solution, I wanted to create a general guideline to help consumers better understand what strategy will make the most sense for them given their unique circumstances. Over the next few weeks I will be writing a series of 6 posts, identifying the common debt reduction strategies and outlining general circumstances in which they could make sense.  

The strategies that I will focus on are as follows:

1.  A Debt Snowball approach
2.  A Debt Consolidation Loan
3.  Consumer Credit Counseling
4.  Debt Settlement
5.  Bankruptcy (ch 7. and ch.13)
6.  Doing Nothing

As I write the posts I will be hyper linking the above strategies to their respective posts.  The goal of this "When Does it Make Sense" series of posts will be to help you form a sort of a cheat sheet, to narrow down the strategies that you should focus your research on. Remember though, More on Get Out of Debt - What Strategy Makes the Most Sense?

You are in Debt, you are struggling, you can't pay your bills.  What do you do?  Like most people, you turn to the Internet.  After all, the Internet has all of the answers.  It is true that you probably can find the answers you are looking for online.  However, you are definitely going to also find all of the wrong answers, and no shortage of websites, sales people, and hucksters more than willing to sell you down the river to make a dollar.  

Just type "Debt Help" into google and it will return hundreds of thousands of websites claiming to have the best program to get rid of your debt.  What you need is a knowledgeable financial adviser and what you get from google is endless pages of generic websites making outlandish claims and asking you to fill out a form with all of your personal information and the amount of debt so some nameless sales person can call you back and sell you a program you probably don't need.

When looking for Debt Help, here are some general rules you can use to avoid making a bad financial situation much worse. More on Debt Help - Who can You Trust

    Debt Settlement Companies are the solution to all of your debt problems.  No matter how much you are struggling or what the circumstances are, they will step in and resolve all of your problems.  Just turn everything over to them and rest easy knowing your financial future is secure.

    Sounds a little far fetched don't you think?  Well if you have ever seen, heard, or read any of their advertisements, this is the impression they are giving consumers. Lets take a "time out" from the B.S. that most of these guys are peddling and look at the Top 5 ways that the typical debt settlement company can do more damage than good if you are not careful.  

5.  Their Free Consultation is just a Sales Pitch for Debt Settlement. 

    When you are struggling with too much debt, the first thing you need, more than anything else is honest, impartial advice about the best strategy for digging yourself out of your financial hole. Some of the strategies you need to look into in addition to Debt Settlement include a debt snowball, Consumer Credit Counseling,  Bankruptcy, and surprisingly perhaps doing nothing at all.

    Unfortunately when you call a debt settlement salesman for a consultation, with very few exceptions, you will simply be given a sales pitch about their debt settlement program.  Just like you would probably not ask a car dealer if it is a good time to buy a new car, you probably wouldn't want to ask a debt settlement salesman if signing up into his program is the best financial move for you.  I am going to go out on a limb and say that the answer will almost always be yes.  

4.  They can increase the likelihood of you getting sued. 

More on Debt Settlement Companies - Top 5 ways they can Screw you!

In the game of Debt Collection, Knowledge is King.  The more educated you are about your legal rights and what your creditors can and can not do if you are unable to pay them, the better off you will be.  If you are dealing with older debt, it is very important to know the Debt Collection Statute of Limitations in your state.  The Statute of Limitations (SOL) is the amount of time that a creditor or debt collector has to seek a court enforced judgment against you on an unpaid debt.  Essentially once the SOL time limit is up, your creditors are SOL and are unable to use the court system to force you to pay.

The Debt Collection Statute of Limitations is commonly confused with the time limit More on Debt Collection Statute of Limitations

If I enroll into a Debt Negotiation program to settle my debts with my creditors, will I have to pay tax to the IRS?

This is a daily question I am asked during my consultations with consumers.  The answer is that it depends on your situation.  Before I review a few situations to illustrate when you may or may not be required to pay a tax on forgiven debt, let me make it very clear that I am NOT a Tax Attorney and I cannot give you specific tax advice.  Please first verify everything with your personal tax professional.

The question about paying taxes on a forgiven debt revolves around a creditor issuing a More on Debt Negotiation - Applying the Insolvency Rule to a 1099-C Tax Liability

A question that I am asked quite often is, "who is the best debt settlement company?"  Well, that really depends on what your definition of "the best" is. Personally I have not seen more than a small handful that I would even consider recommending to a consumer.  Most of these debt settlement outfits have less than a 25% success rate and will do nothing more than siphon fees from consumers before ultimately pushing them into Bankruptcy.

WARNING - Do not even consider working with a Debt Settlement Company until you know if Debt Settlement is the right solution to your current financial situation.  Determining the best strategy for you first, is the most important step that unfortunately most consumers skip over.  You should not call a debt settlement company salesman and ask if you should proceed with a debt settlement plan.  This would be akin to asking a car salesman if you should buy a new car.  Make sure to speak with a qualified financial professional that will review your Overall situation and help you determine the best financial strategy.  If you determine that settlement is the best option, and you want professional assistance, then you should call numerous debt settlement companies looking for the one that has the best debt settlement program for you.

Here are the major points that you should compare:   


More on How to find the Best Debt Settlement Company for you.

Debt Settlement Companies are everywhere.  You have seen the ads on TV and heard them on the radio. You know, the ones where they promise to cut your debts by up to 70%, stop the creditor phone calls, lower your monthly payments, and make your life so blissfully happy that you will wonder how you could have ever lived without them.

In reality, I would rate most Debt Settlement Companies as "Epic Failures."  What follows is by no means an exhaustive list of the things you should look for, but if a company fits this profile, you should seriously think twice about entrusting your family's financial future to them.

Putting up a wall between you and your creditors may sound like a nice respite for you, but it is an absolutely terrible negotiation strategy.  You need to keep the line of communication open with your creditors.  If you have a legitimate financial hardship and you are hoping to work out an eventual settlement with your creditors, you need to have that communicated to them.  After all, you do owe them the money and you should at least extend the courtesy of keeping them in the loop on your financial situation and your plans on satisfying the debt.

More on Top 5 Reasons Most Debt Settlement Companies Fail their Clients.

Over the years I have heard so many half truths and flat out lies told to consumers by Debt Settlement Salesman, I decided to make a list of the top 5 most common.  If you find yourself on the phone with a settlement salesman that floats one of these over to you, go ahead and politely terminate the call and save yourself some time.

More on Top 5 myths told by Debt Settlement Companies

These days American consumers are hemorrhaging under mountains of Debt. Where there is blood, there will certainly be sharks.  Specifically I am referring to Debt Settlement companies. There is definitely not a shortage of shady characters in other forms of debt help, but due to the largely unregulated nature of Debt Settlement, the sharks can find much easier pickings.  

After several years of research, direct involvement in the industry and hearing literally hundreds of horror stories during my consultations with consumers, I am convinced that better than 95% of the Debt Settlement companies in existence are leading clients to financial disaster.  Either through Greed, Ignorance or Both, they are charging big fees, for big promises and little results.  It would be generous of me to say that most of these companies have less than a 25% success rate.    

Over the years I have found one very common thread among the majority of these programs.  Their salesmen (Pronounced,  Telemarketers), do not educate consumers about what debt settlement actually is.  This is because most of them don't even have a clue themselves.  Their job is to sell, sell, sell, not worry about whether or not a consumer will be successful.  After all they probably charge all their fees upfront.  So why should they care if a consumer ends up in bankruptcy next year?

Debt Settlement companies are blasting Consumers with Television, Radio and Internet ads like never before.  All promising the magic pill for what ails them.  Let us cut your debt by up to 70%, just call now for a Free Consultation (Pronounced, Sales Pitch), and we will wipe out everything (Including your wallet).  

Consumers are drowning and most of these guys are throwing out bricks.  Do not call a debt settlement company for a consultation unless you already know if Debt Settlement will make sense for your situation.  Just like you would never ask a car salesman if you should buy a new car, you don't ask a debt settlement salesman if you should settle your debts.

Debt Settlement is an aggressive approach to getting out of debt.  It is not right for everyone.  I tried to find a video online that gave a straightforward and honest look at what debt settlement was and when it made sense.  I couldn't find one so I created my own.  

If you are in Debt and really wanting to research and learn ALL of your options, I recommend you watch this video before calling any Debt Settlement Company. At the very least it will allow you to spot the sharks circling above your head.

Here is a link to the Free video http://DamonDay.com/video

A few days ago Citigroup sharply increased their rates on about 15 million of their card holders. Could the reason be because starting next month there will be laws in place to prevent them from doing this? Nah, couldn't possibly be the reason. Citigroup claims the rate hikes where merely part of regular account reviews. What do you think?

During my Consultations I am often asked about the differences between a Chapter 7 and Chapter 13 Bankruptcy. When considering a Bankruptcy filing, the number 1 thing that you need to know is whether or not you can qualify for a Chapter 7 or if you will be forced into a Chapter 13. The answer to that question, may just determine whether or not Bankruptcy will even make sense for you. The following post is a general overview of the two chapters of personal Bankruptcy.

CHAPTER 7

When most individuals think about a Bankruptcy, they are thinking about a ch. 7 Bankruptcy which is basically a liquidation and discharge of your debts. A bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of the sale of those assets to pay the creditors back. Debtor's will be allowed to keep exempt property, but you will likely lose non exempt assets.

More on The Difference between Chapter 7 and Chapter 13 Bankruptcy