From: Ogar, Jon (GOV)
Sent: Friday, March 05, 2010 4:20 PM
To: Whipple, Deb (GOV)
Cc: Boyd, Elizabeth (GOV); Huls, JoAnne (GOV)
Subject: What the Governor's Talking about Today

Importance: High

Debbie:

 

Following is today’s edition of WTGTAT. You can send it out now. Thanks!

 

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 Michigan consumers seeking debt counseling to contact a state-regulated financial entity.
 
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 Michigan consumers.  Consumers also may find debt-relief assistance at their banks or credit unions.

 

Any debt-management company doing business in Michigan must be licensed by OFIR.  All companies are subject to bonding requirements, exams, criminal background checks, investigations and financial filings.  These firms employ more than 700 qualified debt counselors who specialize in the state’s specific debt laws.
 
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