You’re hopelessly in credit card debt and considering bankruptcy.
Wait — you don’t have to pay it all back, a television announcer claims.
There’s “a secret that the credit card companies don’t want you to know.” This “secret” will wipe out card debts for a fraction of what you owe, promises the ad, which is for CreditAssociates, a credit card settlement company.
“On average, we save our clients in excess of 55 percent of what they otherwise would owe,” CreditAssociates Executive VP Rick Burton told The Post.
But critics question some debt-settlement services and their methods.
These companies usually ask a cardholder to transfer an agreed upon amount every month into an escrow-like account, the Federal Trade Commission writes in a paper. The amount is enough to pay off a settlement that is eventually reached with the card company.
“Further, these programs often encourage or instruct their clients to stop making any monthly payments to their creditors,” the FTC writes.
Card settlement services are “risky,” according to the Center for Responsible Lending.
CRL says that “in order to enroll into debt-settlement programs, consumers are required to default on their debt, which often results in fees, increased interest rates and sometimes even lawsuits from creditors.”
A credit card analyst, who said he would never recommend debt-settlement services, complained that even legitimate services don’t advertise the downside.
“Settling your debt for less than you owe has a devastating effect on your credit. FICO says someone with excellent credit (a 780 score) could lose 140-160 points due to debt settlement,” said Ted Rossman with CreditCards.com.