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Transcript – Debt Settlement Scams

Article | Info Graphic | Transcript

Scott:               Thank you for joining us today.

Speaker 2:       You’re welcome.

Scott:               Well thank you, thank you for joining us.

Speaker 2:       Thank you. I’m feeling grateful today.

Scott:               I’m glad you are.  Today we’re continuing our series on financial scams.  Today we’re talking about debt settlement.

Speaker 2:       Okay.

Scott:               Debt settlement is an industry, it is a legitimate industry where people actually settle their debts for less than what’s actually owed. You probably see a lot of that on TV. You owe $20,000 worth of debt, settle your debt for half, or $10,000, or $5,000.

Speaker 2:       So how do they make money?

Scott:               Well, we’ll get to that.

Speaker 2:       Oh, okay.

Scott:               Essentially, that’s the pitch, that’s the good news.  They try to sell all the pluses to it.  Debt settlement is really an atrocious option, it’s really designed for people that are in such dire financial situations.

Speaker 2:       Oh, you’ve got a hang nail, I got you.  Keep talking.

Scott:               Fantastic, thank you.  Are you better now?

Speaker 2:       Yeah, it was just like eeehhhh, staring at me.

Scott:               Just hanging there.  OK.

Speaker 2:       So then what happens?

Scott:               What happens essentially is you’re either not paying the debts or there’s a good possibility you’re not going to be able to maintain the minimum’s on the debts and you’re going to fall behind.

Speaker 2:       Right.

Scott:               Well a bank essentially would …

Speaker 2:       So they set you up for failure?

Scott:               Does who set you up for failure?

Speaker 2:       Those people that want your money.

Scott:               Well some of them may coach you to set you up for failure, but in a real debt settling situation, you’re either are already not paying your bills or some thing’s happened that going to be foreseeable and you’re going to fall behind.  For example, let’s say your hours got cut from 40 hours to 20 hours and you don’t have enough money coming in to pay your bills.  If you don’t have any savings you’re going to eventually have a problem.

Speaker 2:       File for unemployment.

Scott:               Well, how much does unemployment pay?

Speaker 2:       Not a lot, and someone committed suicide the other day in Beverly Hills because they didn’t get their unemployment checks, and it’s a huge problem actually right now in California.

Scott:               It’s a huge problem everywhere.

Speaker 2:       Well, I only know what happens in California because it’s the only state that matters.

Scott:               So in debt settlement, essentially what happens is, you’re making payments either to an escrow account or some company, and payments are no longer being distributed to your creditors.  What winds up happening now is, the idea is you’re trying to build up a savings plan so that at some point in time

Speaker 2:       Like totally, totally

Scott:               Essentially what happens is, again your making monthly payments and your trying to build up a reserve or a savings account to try and build enough money to be able to settle that debt for less than what you owe.  Now, a legitimate debt settlement firm, or sometimes it’s done by law firms, what they have to do is, while they may collect money on your behalf, they can’t charge you any money until either they’ve settled the account or entered into some form of settlement payment arrangement with each one of your creditors and a payments been made.

Unfortunately the scam in the debt settlement arena, what winds up happening is, the money you’re paying

Speaker 2:       I have a question.

Scott:               What?

Speaker 2:       You suck.

Scott:               That’s not a question.

Speaker 2:       Yeah, it is.  It’s a question.

Scott:               Okay.  Where the scammers come in is, you’re making these payments they’re supposed to be going into a reserve account or a savings account and essentially what’s happening is, the scammers are just taking your money.  There’s no money being saved, it’s not going into any type of reserve account. So now, your creditors are more and more delinquent, they’re not receiving any kind

Speaker 2:       Ooh, I saw a ghost.  God, [inaudible 03:45] it always creeps up on me.

Scott:               Think it’s time for your medication.

Speaker 2:       Is that my doctor?

Scott:               Really?  Now?

Speaker 2:       Oh, I’ll tell him.  You have a [bleep]  I’m sorry.  It’s horrible news.  Any ways, who cares?

Scott:               Ultimately where the scam comes in, you’re making monthly payments to your reserve account, which is usually being managed by the scammer, so your creditors aren’t getting paid and what you think is going into a savings account isn’t.  So now we’ve got an even bigger problem.  Because the collections first are going to continue, you’re in a foot race about to be sued by one of your creditors, and now when you go to reach for that money to try and settle an account, it’s not there.  Why?  Because the person that set you up in debt settlement, what they essentially did

Speaker 2:       I zoned out, sorry, can you start over?

Scott:               How far back?

Speaker 2:       The beginning?

Scott:               The beginning?

Speaker 2:       It’s all right, we’ll figure it out, I got this, we’ll figure it out.

Scott:               We’ll meet privately about it.

Speaker 2:       Sure.

Scott:               In any event, again, with all financial scams as they come to light different regulations come out, scammers really don’t pay attention to regulations.  However, as a tip for you moving forward, if you find yourself in a situation that debt settlement is an appropriate option for you, number one, make sure you look at the agreements, make sure they have the appropriate licensure, or if its a law firm that they have the appropriate credentials, and understand that there is no up front money.  As a matter of fact, you can if you chose to, you can save the money in your own separate accounts to try and do the settlements.

All right, so for DCC Financial [inaudible 05:53] Community, I’m Scott [Tonnell 05:54].

Speaker 2:       My name’s [bleep 06:01].  Your skin is real.

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