Is this credit counseling scam worth it?

Anonymous — Tue, 19 May 2009 15:45:18 -0800

DebtFilter: I've been paying a credit counseling company (law firm, actually) $60 a month for the past three years to make my minimum payments to the credit card companies I owe. They lowered my annual interest rate to an average of 10% and threaten that if I cancel their service, my interest rates will reset. Is that true? I owe about $16,000 (as of today) on four different credit cards and my monthly payments are ~$700. I signed up for the credit counseling company because I had panicked about making my payments and needed to take action. It appeared legitimate at the time, but I didn't really do any research before I solicited their services. They have since been charging me, in addition to the initial $600 fee, monthly fees of $60 to transfer money from my account to my credit card companies (I can still make my payments to the banks directly; I've regained all online access to my accounts, etc.). They provide no other service.

If I took out a personal line of credit to consolidate my debts, I'd still pay more than the current 10% APR, so I think I'm getting a decent deal: but I could make the payments myself, on time, and I'd save a good amount of money.

I called a couple of my creditors to ask them if I would get to keep my current low interest rate, but got very evasive answers (one bank couldn't answer, another told me they'd only talk to the lawyer who currently handles my account).

When I called the credit counseling company to ask what would happen if I canceled their services, they became outright threatening, told me that I'd be a pretty difficult process to cancel their service (signing up took a day and an electronic signature!), and told me the interest rates would reset to the credit card defaults (upward of 25% APR, I think).

Do you have any experience with this situation? I finally have enough time to deal with this: what would you advise me to do?

The credit card counseling agency is called Coastal Credit Solutions; the law firm they signed me up for is Laura Hess Kennedy, currently disbarred: they recently lost a class action suit due to debt settlement fraud (I received a whole lot of mail regarding that, but I'm not a client of "debt settlement" services; they just lowered my interest rate but not my debt amounts or minimum payments).

The Ant and the Grasshopper, redux

Anonymous — Fri, 13 Jan 2006 13:08:33 -0800

What do you do when a sibling asks you bail them out of a financial problem entirely of their making? I am careful with my money. I worked to put myself through school, paid off my student loans, and now I'm making a good salary. I save for retirement, pay down my mortgage, buy used Japanese economy cars, and don't carry any consumer debt.

My younger brother is a college dropout who works freelance in a creative field. When he's working, he makes good money, but it's not steady income. He's spendy; he buys luxury Japanese cars new, financing them such that he soon owes more on the car than it is worth. He buys himself a new computer every year. He has racked up tens of thousands of dollars in credit card debt.

He knows I have money tucked away, and asked me for a "loan" so that he can pay off his credit cards. He says he will pay me back. I know, in my gut, that if I make that loan I will a) not get paid back and b) see the relationship permanently strained by the debt. I believe that he can and should dig himself out of the mess he made. I'm a sibling, not a parent! (My parents have helped him out in the past, but they're retired now and on a fixed income.) I fear that whatever I do, my surplus and his deficit will always be lingering in the air at family gatherings. Either he resents me for not giving him the money, or I resent him for borrowing and not paying it back. It would be too much money to just make a gift and write it off. The last time he was in a money jam I was able to send some freelance work his direction, but that won't always be the case.

How do I handle this?

Ask MetaFilter questions tagged with creditcarddebt

Is this credit counseling scam worth it?

The Ant and the Grasshopper, redux