Comparing debt settlement to other debt solutions
Based on the numbers from the report, it is clear that debt settlement is the winner of this challenge in terms of time to complete the program and the total cost of the program.
North Huntingdon, PA (PRWEB)
September 24, 2013
Century Negotiations was founded by Dave Leuthold in 2003 to specialize in debt settlement and negotiation services and has since negotiated over $ 600 million in debt for its clients. Earlier this year, Dave, co-founder of the American Fair Credit Council (AFCC) helped AFCC produce a report detailing how the debt settlement industry is evolving, comparing debt settlement / negotiation with credit counseling and debt consolidation. In CRF’s new infographic, details from the AFCC report help shed light on why debt settlement services can be the best solution for a consumer seeking debt relief.
With total American consumer debt over $ 2.84 trillion as of June 2013, it’s no wonder debt relief programs have built long-term business into our indebted country. That number comes to nearly 16,000 consumer debt per household! Including that, the average consumer has 3.7 credit cards and $ 8,220 in debt per card in balance. It is therefore not surprising to know that consumers today have approximately $ 5 billion in debt just for debt settlement alone.
Various forms of debt relief are available to consumers looking to get out of the debt pit. In the 2012 AFCC-commissioned report, titled “Options for Consumers in Crisis,” the Council sought to assess the evolution of the debt settlement industry, its relationship with other forms of debt relief and, ultimately, the benefits to settlement / negotiation in the Comparison.
On a very simple level, three of the programs can be broken down as follows:
Debt Settlement: A service provider negotiates the settlement and final settlement of the customer’s unsecured debts for less than the full amount owed.
Debt Consolidation: Involves taking out a loan to pay off several other loans.
Loan Advice: The main focus here is on restoring the loan by creating a debt settlement plan that covers the entire amount owed.
With this in mind, the report looks back 10 years ago on the beginning growth of consumer debt regulation programs. Prior to 2003, debt settlement programs were mostly only available to trading companies. Then in 2005 the Bankruptcy Reform Act was passed which made it much more difficult and expensive for a consumer to qualify for bankruptcy. This is where the debt settlement industry really began to take off.
Traditionally, the “advanced fee” model has been the predominant business model for debt settlement. The fees were based on a percentage of the debt a customer signed up for the program. Most companies charge a 15% fee. This program generally required the consumer to attend the program for at least 6 months to see the first debt reduction. Even so, there were still customers who chose to close their accounts early, losing money in the process and leaving an often unsavory image of the debt settlement industry.
As a result, the FTC initiated an investigation, which finally issued an order in October 2010, which led to a ban on the “Advanced Fee” model for the settlement companies and which had to implement the “Pay for Performance” model. This model suggests that a fee can only be earned when paying a debt, which completely shifts the risk to the debt regulator. Due to the associated financial burden on a debt settlement firm, nearly 70-80% of companies in the industry either stopped accepting new customers and / or went out of business entirely.
Despite these industry changes and the industry decline following the ruling, the debt settlement industry has seen reasonable gains in overall registrations since then. In fact, the fourth quarter of 2012 saw a higher number of customer registrations in the debt settlement industry compared to the last 6 years.
So how does debt settlement / negotiation compare to other solutions like consolidation and counseling? Based on the numbers from the report, it is clear that debt settlement is the winner of this challenge in terms of time to complete the program and the total cost of the program. The infographic is much more specific about the numbers, including a case study examining how long it would take each option to pay off average household debt.
Century Negotiations is based near Pittsburgh, Pennsylvania and serves over 13,000 customers with over 80,000 accounts that represent over $ 300 million in debt. Drawing on decades of experience, CNI continues its mission to provide high quality negotiation and settlement services to free its clients from annoying unsecured debt.
See the full infographic by clicking here.
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