Predatory Debt Consolidation Companies: Going From Bad To Worse

Debt is rising and there seems to be little chance of effectively stopping it from slowing down, never mind about decreasing. And in most cases, consumers have turned toward so-called ‘debt consolidation’ companies, more recently known as ‘debt settlement’ or ‘debt negotiation’ companies. But the truth is that most of these companies exhibit the same predatory characteristics as those who advertised themselves under the banner of ‘debt consolidation’ companies before the spate of bad publicity and legal actions against them. And the simple reason for this is that they are one and the same, having only adjusted their names and supposed ‘affiliations’ as time wore on and more and more people fell into debt.

Getting Deeper Into Debt

A report by the Consumer Federation of America (CFA) indicated that these new ‘lenders’ often drive their clients deeper into debt and reclaim amounts owned by securing collateral, most commonly cars, against these loans. The tragedy of the situation is that there is a fair percentage of individuals who have already faced foreclosures on their homes and subsequently need money to pay off other debts such as credit cards, most of whom apply for these car title loans. More often than not, these loans are for amounts that represent a mere fraction of the car’s worth and have an annual interest rate sometimes of up to 300%. And, to top it all off, title lenders require a duplicate set of keys before they hand over the cash.

This has of course triggered a reaction from bodies such as the CFA, urging states to tighten laws on these predatory title lenders making the practice illegal. But there is still a long way to go as states seem lax about closing those loopholes used by title lenders to exploit those suffering hardships and to reject legislation that would make the trade legal.

Learning from the Past

There is, in retrospect, a moral to be gleamed from the situation, one that will more than likely force consumers and those who lend money to finance their lifestyles and expenditures to re-evaluate their approach to finances. It is often one only learnt from experience which states that debt, regardless of what kind, is not a good thing. But for some that kind of advice might be just a little too late, which means that the best course of action now is on how to differentiate between the good and the bad.

Well, one way is to contact the local consumer protection agency directly as many of these predatory debt consolidation agencies state like affiliations on their advertising material as well as on the Internet. Another authority on the matter is the Better Business Buro (BBB) who’ll be able to advise on legitimate and reduced-risk businesses that offer consumer credit counseling services. These businesses usually operate at a reduced fee and offer free seminars on debt management and budgeting.

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