Dealing with a credit counseling service

[bburch]

What is the name of your state?I live in Texas.

My wife and I had about $8,000 in credit card debt some from college some from our wedding. So about 2 years ago, we decided to use a credit counseling service. We signed on with them, and we pay them $277/month, they take $25 each month for their services. We signed on for them to negotiate lower interest with our credit cards and to keep our payments on time. One of my credit cards that was maxed out at $1500 kept calling me for months after we had started working with these guys and of course we still get all of our statements. We called the counseling company and told them that we were still be called by this credit card, they told us to give it time and the calls would eventually stop. But they didn't! And our statements were reflecting the payments but the card had gone over the limit so we were being charged all kinds of fees. This went on for a while before we could get the counseling service to take any action. They told us that someone had lost the paperwork. And that this particular credit card's interest rates had never been negotiated down. While all this was going on, that credit card is now up to something like $3500. And this sevice just keeps giving us the run around about how they will take care of it, but they haven't done anything about it. And I don't think that they will either!

So Here is my question: Legally is there anything I can do to make this service take care of this extra $2000? And if so what can I do? We did sign a contract with them, and we are paying them $25/month fee to take care of us. The other credit cards have gone down and are under control. I just feel like they should shoulder some of the responsibilty for allowing my account to get worse than it was when I was taking care of it myself.

Also in reading around I have come across this SOL term in dealing with credit card debt. How does this apply in TX? This particular credit card acount was closed back in 1999 I believe.

Any Advice or shared knowledge would be appreciated. Thank You!

 

[olgethorpe]

Bad news...

First of all, almost all credit counseling / debt reduction / debt elimination companies are scams. They take your money for doing exactly what you could have done for yourself...or in some case, for doing nothing at all. Some CC companies do indeed work with their own "captive" counselors...who get a kickback for getting people who otherwise wouldn't to pay. But some CC companies won't work with them at all...

It sounds like you've got at least one CC that fits in th later category. And, I would bet the other CC's have you in a program that lets you pay a smaller amount for awhile (maybe a year or two) with the understanding that your payment and interest rate will increase substanially (sp?) afterwards.

So...do two things...1.) dig out the contract you signed with these people and see what you have to do to cancel it...and, b.) contact your CC's personally and see what kind of agreement you actually have with them. Begin with the one that's increasing and see what it will take to get them moving in the right direction...maybe sending them the extra $25 per month would help.

As for getting the counseling agency to pay for some of the debt they've helped you incur, check with the Attorney General's office in your state to see if there is some action already underway against these people. You're probably out of luck as far as getting any money out of them, but maybe by complaining to the AG or even the BBB you can prevent them from screwing someone else...

 

[bburch]

We have tried to deal with our credit card companies directly, they wouldn't work with us, and told us that if we stop working with this company our rates will go back up immediately. Looks like we were victims of our own happlessness again!

 

[olgethorpe]

Hmmm...

Sounds like the CC's that told you that might have a captive agreement with the counselor. Well...you still have some options...

$8000 is not a lot of money...you may be able to get a personal loan for that amount, at a significantly reduced rate and pay them all off. I'm not a big fan of trading non-secured CC debt for secured debt, but for this amount and if you're careful not to dig yourself another hole with your new found disposable income, it might work.

The other option is to tell the counselor to take a hike...and tell the CC's that you're going to deal with them yourself whether they like it our not. You can throw the BK word at them (doesn't mean you have to, just let them think about it). Then...attack one card at a time...beginning with the highest interest rate. If you haven't yet reached the maximum on some of the other cards, and they haven't been closed by the creditor, you might transfer some of the balance to them. If you can't do that, pay the nastiest one more each month than the minimum payment...and skimp on the others. No...you can't get away with paying the others less than the minimum for very long, but 3-6 months might be okay and it might be long enough to get the bad guy under control. You might also take a hard look at your other bills to see if there's somewhere you can cut back...cable, lunches, out to dinner...that sort of thing. Once you've got the bad guy controlled, start on the others. $8000 divided over two years is only $333 per month...yes, more with interest...but if you can squeeze out $450, you can probably fill in you credit hole yourself.