Foreclosure & Cardholder Default

An article released yesterday by Bloomberg quoted American Express CFO, Daniel Henry, as saying “Defaults by cardholders worsened most in areas where U.S. home prices dropped by more than 5 to 10 percent”.

While this may appear obvious to some I firmly believe that defaults on unsecured debt will continue to increase as mortgage deliquencies and foreclosures continue to climb.  With no sign of a turnaround more-and-more Americans will see their unsecured debt loads increase and will continue to struggle to make ends meet as they try and make the monthly minimum payments to their creditors.

To read the entire article visit Bloomberg.

Technorati Tags: debt settlement, credit card debt, home foreclosure, debt relief

Home Prices Continue To Fall

The other day I was looking at the S&P/Case-Shiller Home Price Indices.  The indices follow trends in home values in several of the country’s largest metropolitan areas.  With almost no exception every index has shown a sharp decline since the latter half of 2006.  Based on residential real estate indicators, provided by Standard & Poors June 2008 report, there is no sign of a turnaround.  In fact, all mortgage delinquency indicators have continued to rise quarter over quarter since the end of 2006.  For example, foreclosures started, as a percent of all loans, in Q1 of 2007 was 0.40%.  As of Q1 2008 this figure has risen to 0.99%.  Delinquency rates, regardless of loan type, have continued their climb in all categories.  Below is a graphical representation of the indices covering a period from 1987 through April 2008:

As disheartening as all this appears the dip has to bottom out somewhere.  The question of course remains when and how far.  I don’t want to spend too much time on this topic, but at the time the dot com bubble burst, I was working as a financial advisor for Morgan Stanley.  The graph above bears a strange resemblance to the trends of other market indexes I pored over with my clients during this period.  Keeping this in mind I am cautiously hopeful but also believe that the dip may end up squaring out for some time before climbing again.

Reference: S&P/Case-Shiller home Price Indices

Technorati Tags: residential real estate indicators, home prices, home values

Educating Collectors

A Provanta negotiator received a call regarding a five year delinquent account on a client that resides in California.

The original balance on this account was $15,744.00 and the current balance is $16,555.00.  Provanta made an offer for settlement in full at $4,723.20.  The collection agent counter offered at $10,761.00.

Our negotiator informed the agent that the client has a current debt load of $89,563.41, and $4,723.00 was all the funding available.  We informed the agent that this account was possibly past the statute of limitations, which in California is four years.  The agent’s response was “we know the account is past statue of limitations and that’s why we want to resolve it now, before it goes to litigation.”  In shock our negotiator gave the collector and brief layman’s education on statue of limitations. The collectors response then was, I will have my manager call you back in the morning to discuss the account.

Hopefully the manager will have more knowledge than the collector.

(Ref. 1527)

Technorati Tags: debt settlement, debt forgiveness, debt collectors

What Are My Options

 

Technorati Tags: debt settlement, debt forgiveness, introduction to debt settlement, debt settlement video

Weekly Settlement Statistics

Total for the week of June 16-20, 2008:

• Total Debt Settled - $181,407
• Total Settlement Amount - $94,793
• Settlement Percentage - 52.3%
• Total Cases Settled - 32

Best Settlement:

• Current Claim - $8,726
• Settlement Amount - $1,947
• Percentage - 22.3% (negotiated with a original creditor)

Worst Settlement:

• Current Claim - $3,559
• Settlement Amount - $2,576
• Percentage - 72.4% (negotiated with an original creditor)

Technorati Tags: debt forgiveness, debt settlement

Debt Minimum for Qualification

The average Provanta client enrolls approximately $30,000 of unsecured debt (mostly credit card) in our program.  Since most news reports state that the average American carries $8-$10K of debt, it’s understandable why someone with $30K of debt would need our help.  The discrepancy between what the average American owes and what our clients owe can also give our negotiators some advantage in the debt negotiation process.  The creditors and their collection agencies have more reason to accept our client’s financial hardship and work out a reasonable settlement arrangement.

But what about our other clients- the ones who owe a total of $5K, $10K or even $12K?  They’re not that far off from the average American so is it right for Provanta to help these clients resolve their accounts through our debt settlement process?  If so, is their situation more difficult for our negotiators since we may not be able to use some of the same arguments mentioned above?  Let me use the hardship of a newly enrolled client to address these questions:

Most of this person’s debt accumulated over the past three years.  He has been with his employer for over three years and has received consistent income.  However, just prior to securing this position, he was laid off for about five months.  He requires medication for high cholesterol, diabetes, and depression.  He is also paying for a breathing machine for sleep apnea.  At one time, he was paying over $300 a month in out of pocket medical expenses.  This has been reduced but it has not made things any easier.  The credit cards were used primarily for living expenses over the past couple of years.  More recently, it has become impossible for him to keep up with the minimum payments.  He cannot get ahead and elminate the debt on his own. 

Our client owes $11,000 in debt.  Although he may just be a tad above the average, his situation is anything but average.  He qualifies for our program because of his medical and financial hardship.  Our negotiators can use this information to effectively negotiate settlements regardless of whether his debt is above or below the average American’s.   

Although we may not be able to help everyone, Provanta will consider everyone’s situation to determine if debt settlement is the right option for them.  We do this regardless of the debt amount so long as the person is truly struggling. 

(Ref. 1526)

Technorati Tags: debt hardship, medical hardship, financial hardship, average American debt

Make Him an Offer He Can’t Refuse

On June 4th, one of our negotiators received an unexpected call from a collection agent. This agent wanted to make an offer to Provanta for a relatively new client.  Since the client was so new, he was just starting to  to accumulate funds in a savings account that was reserved for his debt settlement program.  The current balance on the account was $11,536, our client’s highest account, and he only had $250 in his savings account.

Our negotiator didn’t know what the offer was going to but expected it to be high.  She was prepared to decline the offer and explain it was too simply too high and unreasonable, our client had a valid financial hardship, etc, when the agent made an unexpected offer that we simply could not refuse (at least not right away).  The agent said the account can be settled for $1200 (10% of what was actually owed!).   It was simply too good for us to turn away without serious consideration.

We immediately contacted the client, who was just as excited as we were.  We discussed his options and helped him brainstom the different ways for him to come up with the money.  The creditor agreed to accept the $1200 settlement in 3 payments over 3 months which will make it easier for our client to accomodate.

(Ref.1525)

Technorati Tags: debt settlement results, debt settlement percentages, debt settlement offers, debt negotiation process

Stubborn Creditors

Our debt settlement programs average 36 months from start to finish but we have some clients who are enrolled for a longer time.  Longer than average programs may happen for a variety of reasons.  It can occur when a client skips or reduces his regularly scheduled monthly deposits for the program (often during times of job loss, unexpected expenses, accidents, etc), when difficult litigation situations arise, or when changes occur in a credit card company’s policy.

In one particular client’s situation, he actually had 13 of his scheduled monthly deposits skipped or returned to Provanta as NSFs (non sufficient funds), which was likely the main cause of his program extending to 5 years.  In addition to his long program, Provanta was unable to settle his final account.  The reason for this has less do with the NSFs, however, and more to do with the creditor’s stubbornness.

When the client enrolled, he provided information to Provanta showing that he owed $4,600 to this creditor.   Whenever the creditor responded to our attempts to negotiate, they would make an extremely high settlement demand such as $5,900 or $6,700.  Since the creditor continued to be unreasonable, Provanta focused our efforts to settle accounts with the other creditors who were willing to work out a resolution to the account.

The other accounts settled for a gross total of 46 cents on the dollar while this creditor continued to decline our settlement offers.  We eventually referred the client to an attorney in order to investigate whether his account may have reached the statute of limitations, which would mean the creditor could be unable to pursue legal action as an option to collect the debt.

Despite this, the client asked us to continue negotiations.  He still wanted to resolve the account and pay the creditor as much as he could.  After explaining that the client may have reached the statute of limitations, the creditor still refused to settle the account for a reasonable amount, “reasonable” being an amount that contemplates the statute of limitations possibility.  Keep in mind that this creditor had not received payment on the account for 5 years and would unlikely be able to collect from this client in the future.  In the end, our client decided to officially withdraw and we ensured that the bank holding the funds he reserved to settle the last account returned those funds to him.  This money could have been used to pay the creditor, but since they insisted on taking $0 over a period of five years of offers, our client will likely use these funds elsewhere.

(Ref. 1524)

Technorati Tags: debt settlement, statute of limitations on debts, debt negotiation

Client Withdrawals

On May 19th, I wrote about our client’s experience with a creditor who was threatening to sue our client even though Provanta had legitimately settled the account, received a settlement agreement letter, and made the settlement payment to the collection agency.  After 6 months of hard work and persistence, we got the law office to accept the original settlement agreement and cease any further legal action against our clients.

I have another conclusion to this story.  The clients decided to withdraw from Provanta shortly after the situation was resolved.  They do not blame Provanta for the situation because they know we did everything by the book.  They understand that the situation would not have occured in first place had it not been for poor miscommunication between the collection agency, creditor and law firm.  However, they are simply upset that the situation occurred at all.  They are disgusted with the complications that can arise when someone (in this case the collection agency) fails to do their part in the debt settlement process. 

We had settled a total of 5 out of their 10 accounts even though the clients had only been enrolled for 14 months.  The current claim of these accounts were $42,798.81 and they were settled for $18,760.35- the clients received a gross savings of 56%.  Even though the clients still have approximately $21,700 in debt left to be resolved and we’ve provided excellent settlements so far, they decided to try to make payment arrangements with the remainning creditors for balance in full.  They know that this will likely cost them more financially and that it can take a much longer to resolve the accounts but they are willing to take that risk instead of the risk of the above mentioned incident occurring again.       

It’s always difficult for Provanta to see a client withdraw before we complete their program. We understand that circumstances change and sometimes a client may need to withdraw because of a job loss or increased medical problems.  For this particular client it’s more difficult because their withdrawal resulted from a collection agency’s mistake and refusal to admit their error, which led to the drawn out and unnecessary process to correct the error.  We do however respect our client’s honesty and decision and wish them nothing but the best.    

(Ref. 1523)

Technorati Tags: debt settlement results, debt settlement litigation, collection attorney, debt settlement process

The Attorney Surrenders

This Provanta Client is seventy-seven years old, on a fixed income, and has all the health issues one might expect.  One creditor sent their account to a collection attorney, subsequently suing the client for a delinquent debt of $7,265.00.  After court costs, attorney fees, and interest, the balance had inflated to $11,468.00 despite the numerous attempts we have made to settle since the client enrolled in early 2003.

At one point our negotiator was told they would only settle for 80% of the balance regardless of the clients limited income, health issues, and age.  After the attorney spent time and money to obtain a judgment against our client in 2007, they finally realized the client had no assets they could secure the judgment with.  Today we are happy to report that our clients account has been settled for $5,128.29 only 44% of the current balance and about 70% of the original balance, after five years of delinquency.

(Ref. 1522)

Technorati Tags: debt settlement, debt forgiveness

Outstanding Settlement

A Provanta client had a delinquent balance of $17,133.00.  Through tough and hard-nosed negotiating, our staff was able to settle the debt in full satisfaction for $5,996.54 only 35% of the balance.  That’s a total savings of $11,136.46.

Though any particular settlement is never a guarantee for any particular future result, some clients can certainly expect similar results from time to time on some cases.

(Ref. 1520)

Technorati Tags: debt settlement, debt forgiveness

“Standard” Won’t Do

Today, one of Provanta’s debt negotiators was attempting a settlement for one of our clients with a Successor In Interest or Debt Buyer.

As our negotiator opened dialog with the agent, he was given the “standard.”  This agency’s “standard” settlement offer is 60% of the current balance, which would be $4,879.00 on this client’s debt.  The negotiator countered the agents offer with an offer of $1,640.00, which was only 20% of the current claim.  She emphasized that the client’s account is more than four years delinquent and that recovery, no matter how small, should be an important part of their decision.

She was hoping to get them off of their “standard” and go lower, and she was pleased when they came back with 25% of the current claim as an acceptable settlement amount. The client is now getting a settlement of $2,032.00 on her $8,131.00 account, which amounts to almost $6,000 worth of savings.

(Ref. 1521)

Technorati Tags: debt settlement, debt relief, bad debt buyers

Weekly Settlement Statistics

Total for the week of June 9-13, 2008:

• Total Debt Settled - $131,618
• Total Settlement Amount - $62,522
• Settlement Percentage - 47.5%
• Total Cases Settled - 25

Best Settlement:

• Current Claim - $8,868
• Settlement Amount - $1,956
• Percentage - 22.1% (negotiated with a original creditor)

Worst Settlement:

• Current Claim - $4,121
• Settlement Amount - $3,500
• Percentage - 84.9% (negotiated with an original creditor)

Technorati Tags: debt forgiveness, debt settlement

38 Months to Freedom From Debt

A young couple, Provanta clients, just received some very good news from us.  Not only did we just settle an account for them, it was the last account on their program.  In approximately 38 months, we were able to settle all 9 of the accounts they enrolled and they are debt free.

Our clients had a financial hardship when they first enrolled.  For over a year and a half, the husband worked for the military and he was relocated to Hawaii, so he and his wife were separated for quite awhile.  When he finally switched jobs to be back at home, he worked for a year and then suddenly, he was laid off.  He was still collecting unemployment by the time he and his wife had their first child.  His wife was also not working and collecting disability.  They were new parents, unemployed, and struggling with medical bills when they contacted Provanta.

Their financial hardship actually worsened during our program.  While the wife was pregnant with their second child, she was in a serious car accident.  The car was totaled but luckily, both the unborn child and mother were going to be okay.  Provanta worked closely with the clients to help them maintain their program despite the unexpected and scary experience.  We made adjustments to their program and to our negotiation strategies to accommodate their new situation.

Though their program took 38 months instead of 36, as originally estimated, our clients are thrilled to finally be able to put all of this behind them and concentrate on raising their children.  In addition, since they referred someone they knew to our debt settlement program, we offered the clients the option of receiving $595 cash or $1000 credit toward their final Provanta fees, simply as a thank you for helping someone they know become debt free through our program.  They opted for the credit so not only did we settle their last account for them, we paid the fees associated with it.  They are very happy.

(Ref.1519)

Technorati Tags: debt relief story, debt hardship, debt management program estimates, debt management referral program, debt settlement results

Outrageous FDCPA Violation

As I was reading an article about a $200 million lawsuit that the FTC and FDIC are jointly trying to file against a major, publicly traded credit card marketer and its debt collection agency for deceptive marketing and numerous FDCPA violations, a Program Manager popped her head in my office to let me know that a collection agency is calling our client’s neighbors and leaving notes on the neighbor’s door about our client.

I am amazed.  The above referenced companies are facing a $200 million lawsuit for FDCPA violations.   The FTC reported in it’s Annual Report 2008: Fair Debt Collection Practices Act that in November 2007, the FTC won a lawsuit against another collection agency for misleading, threatening and harassing consumers.  This collection agency was ordered to pay over $1.3 million in fines to settle the case.  A popular political topic in this year’s presidential campaign has been the credit card industry and America’s growing debt problem.  With all of  this going on, I am amazed that there are still some credit card companies and collection agencies with the audacity to so blatantly violate our client’s basic consumer rights and not think twice about it.  Did they not get the memo on what’s going on, or do they simply think they are above the law?

Well, be assured that we are working very closely with the client to help her through this troubling incident.  She is just as angry as we are about the situation and she plans to file an official claim with the FTC against the collection agency.  I hope that others who have had such an awful experience will do the same so that FDCPA violators can be penalized for their behavior.

(Ref. 1518)

Technorati Tags: FDCPA violation, creditor harassment, FTC debt collection complaint, collection agency abuse

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