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What the Governor’s Talking about
Today
Friday, March 5,
2010
Governor Warns Consumers
about Unregulated Debt-Settlement Programs
The governor today joined Ken Ross, commissioner of the
state Office of Financial and Insurance Regulation (OFIR), to warn consumers
seeking debt-relief assistance to avoid unregulated debt-settlement
programs. The governor advised
Usually with
debt-settlement programs, consumers are charged exorbitant up-front fees, and
their monthly payments are held in escrow accounts. The debt-settlement
company then will attempt to negotiate payoffs with creditors, one creditor at
time. Debt-settlement companies usually also advise consumers to stop
paying their creditors. But if creditors are avoided, the consumer’s
credit score will fall dramatically while debt interest, late fees and
creditors’ harassing phone calls continue to increase.
A number of
these unregulated companies are illegitimate businesses trying to scam
consumers. In some cases, debt-settlement companies have disappeared after
consumers paid them thousands of dollars in up-front
fees.
One sound debt-relief option is state-licensed,
debt-management companies that are required to employ qualified debt counselors
and offer detailed budgeting and debt and credit counseling assistance to
Any debt-management company doing business in
Debt-management companies may
recommend to consumers to simply make a few budgeting changes to eliminate their
debt, enroll in a debt-management program or, in extreme cases, declare
bankruptcy.
A consumer who decides to enroll in a debt-management
program pays a limited monthly fee to the debt-management firm. The
company then pays the consumer’s creditors on a monthly basis. The company
will negotiate with the creditors to try to get a lower interest rate for the
consumer and waive over-the-limit and late fees. Most debt-management
plans average three to five years for consumers to eliminate their
debt.
Key
messages:
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Jon
Ogar
Senior
Writer/Editor
Communications
Division
Office of Governor
Jennifer M. Granholm
Office 517-335-6819
Cell
517-515-2743
Fax
517-335-6790