Consumer Proposal in Toronto

New York Times exposes the debt settlement industry

I read a very interesting report from the New York Times that claims the majority of “debt settlement companies” (i.e., unlicensed and unregulated businesses offering debt relief) in the United States are fraudulent or deceptive, with very few businesses working towards the best interest of their clients. A link to that story is here.

According to the Times, here are a few interesting points about how these companies operate:

  • their fees are typically 15 to 20 percent of the credit card balances carried by their customers;
  • they tend to collect fees upfront, regardless of whether a customer’s debt is actually reduced; and
  • their customers rarely emerge from debt settlement programs with their credit card balances eliminated, and many wind up worse off, with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors.

The problem has gotten so serious that federal and state regulators are now starting to crack down on the American debt settlement industry. That is a good thing.

Regrettably, similar businesses operate in Canada, particularly in the Toronto area as it is Canada’s largest urban centre. Moreover, unlike the U.S., there has been no movement to crack down or regulate the debt settlement industry in this country. So, if you find yourself being pitched about getting out of debt without having to file bankruptcy or ruin your credit, you should ask yourself if this pitch is too good to be true. It usually is….

If you find yourself in financial difficulty, you should seek the professional advice of a federally licensed trustee in bankruptcy. Trustees in bankruptcy are licensed by Industry Canada after going through a rigorous process of professional training and background checks in order to be licensed. Their professional activities are also monitored by Industry Canada on a regular basis.

Even if your financial situation isn’t serious enough to require the services of a bankruptcy trustee, a trustee can provide you with guidance in dealing with your debts in the best manner possible. Moreover, most trustees will provide you with a free initial consultation.