Suing Settlement Company..Is it Possible?

[bbtandme]

What is the name of your state? Illinois

Just trying to find out if anyone may have been in or have heard of a similar situtation......I "hired" a credit settlement company to settle my unsecured debt. This company is out of California and is headed up by an Attorney who is still, according to the the State Bar of California, in good standing (Shocking to me.) From the moment I signed a contract with this company, it has been nothing but downhill. They have not fulfilled most of the agreement as the way the process and company operated was really misrepresented to me. I was told from the get go that once I had money to pay 40% of the original debt amount, I should begin negotiations with creditors through their "highly trained team of professionals." So far, it's been 18 months and they have been able to settle 2 of the 8 accounts for right around 70-80% of the original debt. When I "signed up" I was told I could pay my debt whenever I had the money, but ultimately it could take up to 2 years. I had some money early in the process and was told by the company when I tried to start settling, that I wasn't far enough in debt to begin negotitating a settlement. Basically I'm wondering, by the very limited amount of information I have provided because if I continue, you'd be reading a novel....do I have any recourse towards the lawyer in this case or is this just bad business and not unethical behavior?

Secondly, I've let them know that I will no longer be needing their services as I have gone directly to the credit card companies and been able to settle on my own for a fair amount, however I am trying to get somewhat of a refund from this company. They say their fee is divided into 3 parts...#1 is like a retainer fee and is non-refundable. #2 is to start the negotiating process (which they did on at least 2 accounts) and #3 is when the negotiating process commences, which hasn't happened on 6 accounts. Does anyone think that if they don't offer me the 1/3 refund after I ask, I have any grounds to take them to court? Just trying to get a little money back in a long shot from a business I never should have gotten involved with in the first place!!!! Any comments would be helpful, if not at least encouraging.

 

[Chien]

Just trying to get a little money back in a long shot from a business I never should have gotten involved with in the first place!!!!

You asked for opinions. Mine is that that says it all. I'm sorry that the opinion can't be more encouraging.

is this just bad business and not unethical behavior?

I think it was a bad business decision on your part, and now there's "buyer's remorse". Not trying to beat up on you; just would not like to see the sinkhole get any deeper, and that's what I expect will happen, if you try to go to court. That said, don't let one opinion stop you.

You don't say what "misrepresentations" enticed you to enter into a contract, and you don't say what terms and conditions the contract provides. You don't say what references you checked beforehand, and you don't say that you first tested your own negoitiating skills. Now you know that you can do better on your own and probably always could and you want out. You explain your situation in an intelligent and articulate manner. What do you think the court will think, when you explain the basis of your claim.

I was told I could pay my debt whenever I had the money

For there to be misrepresentation, "it" (what you were told, shown, promised) should be such as would mislead the reasonably prudent person. Do you honestly think that responding favorably to that was an exercise in good judgment? Again, not trying to denigrate you but, on the facts posted, I think that you have a poor case and it is likely that you will not prevail.

Search the Internet or just this forum and you will find considerable evidence of bad experiences with the least savory and committed of these companies. The fact that you didn't search or that a red flag did not go up, if you did, will not help to persuade anyone that you were misled.

 

[bbtandme]

Thanks

Thank you for responding. I guess I just needed someone to confirm what I already now. Just to clarify, when I spoke to their "legal advisor" she informed me that I would be able to settle, through their company at approximately 40% of the debt I had and therefore would save me a ton in the long run. What ended up happening is they began to settle at 75-80% because my credit wasn't horrible and then proceeded to tell me, after they had their fee, "that every case is different." Bottom line, I should not have "hired" them, but they sold me....kudos to the sales person for getting me to buy. Thanks again.

 

[Debt Guy]

You have been had by "big promises - little results". My guess is the contract agreement is not only ironclad but entirely in their favor. It is common to have language similar to "this agreement is the entire agreement between the parties and any verbal represenations are not binding on the company".

I know this is of little benefit to you -- but there are others who read these posts. So, for their benefit, I am posting my standard answers to people who ask about CCCS and Debt Settlement companies:

CCCS goes my lots of different names –credit counseling, debt consolidation, and debt management – but it all pretty much works the same. You send them one big payment and they break it up into small payments to creditors.

CCCS will attempt to work out an "affordable" repayment plan. Generally, the CCCS will ask creditors to reduce the interest rates so that monthly payments go mostly to principal and thus pay down the loans.

Not all creditors work with CCCS type companies. You can't make them do so. So, if one refuses, then you are just out of luck. Hopefully, the CCCS will tell you about it -- but, not always.

Even those who participate will not necessarily reduce the monthly payment required -- just more of the payment goes to principal and thus you pay off the debt faster. Most CCCS companies negotiate programs to pay off the debt in 4 to 5 years.

Yes, CCCS does work for the credit card companies. But, that does not in itself make them evil. There are good ones and bad ones. The best ones are locally based. The best of the best are agencies of the local United Way. Some of the more reputable ones can be found at www.nfcc.org.

Ironically, CCCS does affect your credit negatively. Every debt enrolled in the CCCS program is reported that way on your credit report for the whole world to see. Many lenders, especially mortgage lenders, view CCCS as a non-judicial Chapter 13 bankruptcy. Mortgage lenders tell me that you need to be out of the program for at least a year before they will even think about a home loan.

Even an honest CCCS can be a good fit or it can be a bad fit for the situation. Every situation is different. You need to understand the pros and cons of the strategy.

I am not as negative as many on this board about settlement companies. It might or might not be a good fit for what you need. Again, it depends on the situation and there are pros and cons of the strategy.

Most settlement companies cannot stop the barrage of collection calls – some are better than others.

A settlement company will attempt to negotiate discounted settlements of your debts. The potential for savings is significant. However, you must be able to fund the settlements as lump sums -- creditors will not accept a discounted payoff on installments.

But, there are lots of scam settlement companies out there. They are much more interested in separating you from your money than in helping develop a strategy to achieve an end result that leaves you in a better situation. Many of these companies require their fees to be paid in advance. You will lose those fees if you grow weary of the program and terminate -- or when you find out they could not accomplish what they promised.

There are some ethical settlement professionals. I know because I had a company fail and was so upside down it was not funny. My attorney recommended that I hire a settlement professional. After a lot of research, he and I developed a set of criteria to sort the good from the bad and it worked for me. I was not unhappy. But, I sure have seen a lot of people take a royal you-now-what. Every single time they failed to follow the rules that worked for me.

My advice on choosing a settlement company is:

1. There is no painless solution to your problem -- so don't look for one and beware anyone who tells you there is no pain. Be sure to understand all the choices you have and to evaluate the pros and cons of each alternative. You will know what makes sense for your family. It is OK to listen to all the self-appointed experts on the internet. But, you make the decision based on your own good judgment.

2. Never ever never pay anything in advance. Most of these guys want thousands of dollars in enrollment fees and it comes up front. Once you pay that money, what is to keep them interested in you? Not much. If you cancel, then they keep all the money you paid and they did nothing to earn it. An ethical company will only charge a fee after they have produced a result that you agree is satisfactory.

3. Read the agreement carefully. Never accept any clause that pre-approves the acceptance of any settlement without your express consent.

4. Beware of anyone who makes the process sound too easy. If they want to set you up on "easy monthly payments" and it will take 3 or 4 or 5 years -- back away fast. You are going to get the bejezus sued out of you and they will just say "don't worry, it is only a judgment and we will deal with it later". I would worry. You should worry also.

5. Understand that you must be in default in order to settle the debt. Being in default will affect your credit negatively. If you are already having credit problems, then the settlement program is not likely to make your score much worse that it already is. If you are current on your debts, then you must weigh the pros and cons – is the financial savings and potential solution worth the negative impact on your credit for the next couple of years? It does recover in time, but you should expect a decline and then a gradual improvement once the problem is behind you.

6. Sending money monthly to a settlement company is almost always a bad idea. If you want to save monthly, open an account at the bank. Stay in control of your money. Period.