Increasingly I am seeing a lot of advertising with catchphrases such as “we can reduce your interest rate” or “we can reduce your debt by 70%”. The ads are popping up everywhere, on the internet, bus shelters and print. Just what do these ads mean?

I would like to share stories of 2 people I met with recently. I have not used their real names. The first person, I will call her Jill, was dealing with Company A. She was doing was she thought was a debt management plan . Jill had $20,000 in credit card debt and was paying company A $500 per month. What she didn’t realize was this was just their fee to start the process. Company A was charging her a total fee of $5,000. After this fee was paid, they would then approach each of her creditors to see if they would agree to a settlement plan. In the meantime Jill was continuing to receive past due notices and very aggressive collection calls. It wasn’t until she followed up with Company A that she realized what their plan was about. Jill had never met with anyone in person. She just filled out an on-line questionnaire, received information about a payment plan and sent in a void cheque for payment. She thought she was going to be debt free in 40 months; instead she was more stressed than ever. That is when she came in to see me. We reviewed her options and she chose to file a consumer proposal .

Last week I met with Gary. He was about to sign up with a plan with Company B and wanted a second opinion. We reviewed the information he was given and I pointed out that Company B was going to charge him $2,400 for a fee and then he would pay $200 per month for 36 months to his creditors. After Gary paid Company B all they were going to do was to refer him to a trustee to file a consumer proposal after their fee was paid. When someone files a consumer proposal with a trustee the monthly payment includes all fees and disbursements. You can probably guess what he decided to do. He saved himself $2,400 and filed a consumer proposal with me.

The lesson here is buyer beware. What services are you signing up for, who will you be dealing with and how can the company guarantee a debt reduction? If the fee sounds unreasonable the easy answer is don’t do it. I deal with many credit counselors who charge $25 – $200 for the time they spend with you.  Anything more than that is probably not very reasonable. If all the credit counselor is going to do is complete a form and then send you a trustee it’s important to remember that you can just call me yourself and meet with me. Finally, no one can guarantee a reduction in your debt. In a consumer proposal it is up to the creditors to vote on the plan, it is your proposal to your creditors and your creditors decide if they want to accept it.

If you want more information about whether a consumer proposal is right for you call me at 310-PLAN or email me.