Chicago Tribue | Business

By Humberto Cruz, Tribune Media Services

A California woman deep in credit card debt turned to a debt settlement company that immediately began deducting money from her bank account for its promised services.

After three months, the woman started getting calls from her creditors and learned they’d never heard from the company. She asked for her money back but received only $277 of $1,077 she had paid. Thanks to the Los Angeles County Department of Consumer Affairs, she got the rest.

The lesson: Many debt settlement companies collect their fees long before they contact creditors and keep the money even if they never settle the debt. Better to negotiate directly with your creditors or seek advice from a local non-profit credit counseling service (check with the National Foundation for Credit Counseling at nfcc.org or 800-388-2227).

In Ohio, homeowners in danger of losing their homes to foreclosure received automated calls from a company offering to help obtain new loans or loan modifications. After paying $1,800 or more, they got nothing.

Fortunately, the state attorney’s general office obtained a judgment against the firm. To avoid mortgage rescue scams, contact the lender directly or call 800-569-4287 to find a government-certified housing counselor.

Another horror story: An Arizona couple got a call from a telemarketer saying they had “won” a Bahamas cruise and three days at a Fort Lauderdale, Fla., hotel. To hold this vacation “package,” they had to agree to have $538 charged to their credit card and attend a timeshare presentation.

Feeling rushed and pressured, the couple agreed. But when trip materials came in the mail, they learned there were fees for the hotel stay and for a supposedly free rental car. Research on Web sites showed the hotel received poor guest ratings and the couple could book a Bahamas cruise on their own for $100 a person. They contacted the Florida Department of Agriculture and Consumer Services, which got their $538 back.

In another case, a 92-year-old man filed a complaint with the Florida department against 24 telemarketers who promised to resell his unwanted timeshare. He paid them a total of more than $74,000, far in excess of the original cost of the timeshare, but nobody sold it for him. Some telemarketers have agreed to refund his money and the Florida department is seeking refunds from surety bonds some of the others have on file.

During tough economic times, “many people are trying to get rid of timeshares because they cannot afford to pay the monthly fees” for things such as maintenance and property taxes, said Anna Huddleston-Aycock, president of the North American Consumer Protection Investigators (NACPI). If you want to sell a timeshare, avoid resale companies that take upfront fees whether or not the timeshare is ever resold.

All these cases are among dozens detailed in an annual study of consumer complaints conducted by the Consumer Federation of America, the National Association of Consumer Agency Administrators and the NACPI. The 33 state, county and city agencies from 18 states that responded to a survey received more than 300,000 complaints and obtained nearly $110 million in restitution or savings for consumers last year.

They had to do in the face of widespread budget and staff cuts and economic conditions that helped spark a rise in complaints, in particular bogus offers to avoid foreclosure.

Best advice? “When in doubt, check it out,” the study recommends. “If you’re not sure what your rights are or you think something might be fishy, ask your state or local consumer agency for advice.”

New credit card rules could mean a tough time getting a new Visa or MasterCard.

The tighter credit card rules imposed by Congress — mixed with a nation swimming in debt — mean credit card companies and banks will become more picky in selecting their card holders, says Valley credit counselor Dean Wegner.

“Right now, they’re looking for quality vs. quantity, going into 2010,” Wegner said.

People getting cards should not expect as many perks as in the past, he said.

“You’re probably going to see more annual fees, a reduction in points and miles and cash rebates, things like that, a lot of the incentives.”

Those unsolicited credit card applications in the mail might disappear as well.

Credit limits will be reduced — even for those with great credit scores, Wegner said.

“Usually, a great indicator of that is high FICO scores. But, a change from this time last year — a 760 FICO score, typically a new credit limit would be $8,000. Now, that’s reduced to $4,500, on average.”

“Credit card debt is a virus in our culture right now,” he said. “We are the most in debt country of any country in the world with credit card debt.”

Wegner said tougher credit rules should be a wake-up call for people to start using their ATM cards.

“Right now, we’re carrying huge amounts of credit card debt. I think our country needs to get out of it. The abuse of practices, the nuisance fees, all that really needs to go away, and we need to operate more like Europe where everyone operates on debit cards.”

Most Americans agree, credit cards tempt them to buy more.  83% of adults said that credit cards tempt people to buy things they can’t afford according to a Rasmussen reports national telephone survey.  8% disagreed with this and another 9% were not so sure.

The results that the telephone survey found are similar to the results found last holiday shopping season.

20% of adults say they don’t have credit cards, down 5 points from last year. 23% say they have only one credit card, while another 19% say they have two. Just over one year ago, 34% reported having either one or two credit cards.

36% of adults report having at least three credit cards, and 18% say they have more than three. At the end of last year, 38% said they had at least three cards.

82% woman compared to 73% men report having at least one credit card. 1/4 men do not have credit cards.

Americans may be opting to hold fewer credit cards these days since 50% say interest rates on their cards have been raised in the past six months, as Congress seeks to limit the ability of banks to raise those rates.

24% of Americans also say they need to cut back on using their credit cards.

57% of Americans say there is a need for better government oversight of the credit card industry.

Before you consider filing for bankruptcy, it is important you understand the difference between different types of bankruptcy and your reasons for filing.  Credit rating is affected and much legality is involved.

Full freedom from the debt is not easy nowadays as the changing laws are getting tougher. Federal laws are supplemented by additional laws in many states.

If you are filing for bankruptcy, you can be affected by two main chapters of bankruptcy, Chapter 7 and 13.  Both of these chapters of bankruptcy are common and take into account individual debtors and small filers.

Chapter 7 also known as liquidation frees the debtor from all requirements to repay debt and may result in liquidation of assets.  More commonly, the debtors assets are exempt from the process of liquidation.  Fraud-related loans, student loans debt, State and federal debts may not be discharged through this process.

Chapter 13 is for the restructuring of debt and is commonly known as Reorganization. A repayment plan can be worked out by the debtor and creditor on the basis of approval from the court regarding the payment of the debt.

On the other hand, Chapter 13 an attempt to liquidate assets for the payment of complete debt amount. In order to make part payment of the main debt, re-structuring of payment plans is done more often. You can clear all your debts in less than five years.

Legal and Filing fees: Fees is approximately $800 or may be higher for a single person. Couple fees and business owner fees is $1,000 or more. You have to keep all the paperwork up to date to help your attorney in filing your documents. You will also have to spend time reviewing bills and answering questions to your attorney.

Click here to view the U.S. debt clock in real time ->   http://www.usdebtclock.org/#

Did you know that you’re entitled to a free yearly credit report for all three credit reporting agencies?   There is a free website you can visit to request this free credit report once a year. At SettlementMax, we strongly encourage our clients to take advantage of this free valuable service.  Here is the link.  annualcreditreport.com

You are not alone. Banks have been given the ability to charge excessive interest rates, late fees and this has fed their cash cow, us the consumers. Trying to put it in the back of your mind and ignore it is not the right solution. Take action and explore all your different options before you start your journey to financial freedom.