Costco Connection - April 2012

; CONSUMERconnection ‘Til debt do us part

Ask David
Horowitz

MOST PEOPLE WANT to lower their monthly credit card payments. For anyone struggling with bills, the offer to consolidate debt often is met with a great sense of relief. Some people seek a debt-relief company because they owe more than they can realistically manage to pay back in full, and they want to avoid bankruptcy. Others consult a debt-relief company because they are fed up with their credit card company over spiraling and unfair interest rates.

Beware! Scammers take advantage of people who are in desperate situations, and those in debt are prime targets. Often a promise to help reduce debt is simply too good to be true. Here is what you should know before doing business with debt-relief companies.

Understand your goals

It is important to move forward with clearly defined goals. How deep in debt are you? What kind of monthly payments can you make? Are you prepared to pay a fee for this service?

First and foremost, understand the difference between debt settlement and debt consolidation.

In debt settlement, a consumer who is behind in payments can pay off the debt in full for less than the amount owed.

In debt consolidation, the consumer takes out a loan to combine debts into one payment, typically smaller and at a lower interest rate than the current debts.

Before contacting a debt-relief company, go through your savings, checking and credit card statements. Write down all of the expenses you can eliminate. Call your creditors and inquire about a lower interest rate. If you are still unsatisfied with your debt level and you look at debt-relief companies, understand what they are and be wise in making your decisions.

Debt-relief companies

Many companies claim that they can help you alleviate debt. You may receive an unsolicited phone call, email or letter offering to help you consolidate your credit card bill. If you run an Internet search for debt-relief programs, you will find plenty of companies making guarantees that they can help. Some of these companies are simply aiming to get their hands on the fee you’ll be required to pay for their services.

It can be hard to vet debt-relief companies. Some companies make promises they cannot deliver on— e.g., how much they can save you on your debts. Some say they will save you 70 percent of what you owe. However, even if they can negotiate settlements that low, they neglect to tell you how much you will be saving after you have paid their fees.

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Some companies let you pay whatever you can. They may be setting you up for failure. You should know, before getting into any kind of agreement, that to achieve any type of savings the repayment schedule should take no more than three years. Some debt-relief companies will put you on a four-year (or longer) schedule in return for accepting whatever payments you can afford. What they are not telling you is that, when all is said and done, you likely won’t be saving much, if you can manage to stay on the schedule at all. Again, their goal is to continue to get their fee, with little regard to the timely reduction of your debt.

How to avoid being scammed

✔ Beware if they charge you for their fees upfront, as they may not have much incentive to work hard or lower your debt.

✔ Don’t trust a company claiming that debt settlement won’t affect your credit. Often this is simply not true.

✔ If a company claims it can eliminate all of your debts, it is making a false promise. This is a clever sales tactic that preys on the eagerness of those in a great deal of debt.

✔ Any company that charges an initial consultation fee cannot be trusted and is looking to get the money upfront even if you choose to go elsewhere.

✔ Ask a lot of questions. Write down the answers.

If you are in doubt, there are options and people who can help. If you choose to avoid bankruptcy by tackling your debt head-on, beware of companies that will prey on your urgency. Make sure you clearly understand your goals and what type of realistic service you can expect to get when approaching debt-relief companies. C

I PURCHASED A camcorder from a small electronics store [not Costco]. To be safe, I purchased the manufacturer’s warranty as well. After a few months, the product broke down. The store sent it to a repair center to be ;xed, but when I received it, it was in worse shape than before. I wanted my money back, but according to my warranty the store must send it back to the repair center at least four times before it can be refunded.

Steve Dallas, TX

THE FIRST thing you should
do is go into the store and
speak with the person who
sold it to you. Often when you
deal with someone face to face
you can get the resolution you
seek. Tell them that you don’t
want your camcorder sent
back to the manufacturer’s
repair center. Tell
them you want to
deal with the store
itself, not the
larger manufac-
turer of the
product. If they
can’t help you,
speak to a
manager and
say you want a
direct refund of your
product and do not
want to be processed
based on the manufac-
turer’s warranty.
Purchasing the
warranty on a product
should not mean you are
restricted from getting a
store refund when the
product is faulty. C

AMY CANTRELL

David Horowitz is a leading consumer advocate. Visit his blog at www.fightback.com. He is a frequent guest on radio and television stations. Consult your local listings for dates and times.

Do you have a question for David?

Just log on to www.fightback.com and “Ask David.” For a fee, he will personally respond to your problem if you follow the instructions printed on his website. (Costco members receive a rebate off the normal fee.) Questions and answers of the greatest interest to Costco members will be used in this column (with the permission of the contributor) and will be posted on www.fightback.com.