Worried about debt? Avoid the scams.
Debt relief ads are prominent on television, the radio, email and the Internet. The Arkansas Attorney General’s office has even warned of “robocallers” promising miraculous debt cures but offering considerably less.
Mark Foster, director of education for Credit Counseling of Arkansas (CCOA), said he has become increasingly concerned about offers that claim to be tied in some way to President Barack Obama’s various stimulus spending packages.
“That’s bogus,” he said. “There’s nothing out there to help with consumer debt.”
Foster also advises people to approach people saying they have programs only for individuals with only a certain amount of debt, typically around $10,000. Often, those businesses are out to make money off of debtors — the higher the debt, the more those services can charge in indirect or direct fees.
“Legitimate credit counseling agencies … will work with you if you have $10,000, $1.50 in credit card debt or no credit card debt at all,” Foster said.
CCOA works with all manner of debtors, and Foster said many of the services it offers are free. One of the more fundamental services offered by CCOA — a budget, or debt management plan — does come with a fee as does a credit report review. However, CCOA offers does offer a number of free services — credit counseling sessions, housing counseling for people on the verge of buying homes, home buying classes, counseling for people who are or are in danger of being delinquent on mortgages.
“What’s the catch? In this case, free is free,” Foster said, explaining that grants allow CCOA to offer certain services at no cost to consumers.
Foster said people should be wary of groups that claim they can eliminate debt as, quite often, that’s simply not possible. He said CCOA relies on debt management plans as a means of helping people get out of debt. Under that process, CCOA will help clients put together realistic budgets and stick with them and will also work with creditors on lowering interest rates and/or minimum payments. Also, he said CCOA typically works with creditors to reduce or eliminate any fees that debtors ran up when they fell behind on their payments.
He said debt management is a way through which CCOA can meet their obligations, get their finances under control and — in many cases — take steps toward improving their credit scores. He stressed that debt management is a different breed of cat from debt settlement — a process through which creditors agree to waive certain debts or accept considerably less than what they are owed by debtors.
That process, Foster said, can have a very negative impact on credit scores. Another wrinkle has to do with potential tax liability — those write-offs count as income for debtors and any reduction of more than $600 is taxed as such, he said.
Meanwhile, Foster said he has some intriguing statistics on hand that may surprise some people as they paint a consumer financial picture that is healthier than one might expect when the economy is down. He said consumers are continuing to pay their unsecured debts as the delinquency rate has dropped 30 percent over the past two years and is the lowest it has been in 17 years.
Also, the average credit score has increased to 696 and is, at the level, the highest it has been in four years. Furthermore, Foster said the credit counseling industry is down 60 percent from 2010.
“It might be that people are running scared and working on saving money and curbing spending ,” he said. “Also, some people are confused about who to see for help.”
All all, Foster said the economy is clearly still improving and perhaps consumers have responded appropriately in this environment.
“It seems like people are really reigning in their spending and focusing more on saving and knocking out their debts,” he said.
Visit CCOA on the Internet at CCOAcares.com.
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.