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Monday, October 23, 2017

Debt Consolidation Referral Fees

Posted by PattiM on

A number of firms looking to make easy money supposedly fixing your debt problem are vigorously soliciting Mortgage Brokers and Mortgage Agents looking for you as a referral client.

They offer the broker/agent as much as half of the fee they are going to charge you. That’s right they will charge you a hefty fee — see further for how it is calculated.

Their fee is based on 50% of the amount they intend to save you.

Here is an excerpt from their pitch to the brokers and agents:

“Debt arbitration is our primary product, though which we are able to significantly reduce our clients debt loads by leveraging their financial hardship with a lump sum payment.”

They go on to say:

“As financial hardship is often the reason our clients come to us, few have the resources available to make a lump sum payment on their own, thus mortgage financing – either refinancing a current mortgage or obtaining a second mortgage – is a crucial element to the service we provide.”

These so called “lump sum settlements” are supposed to improve your situation beyond that of a Consumer Proposal (see our information on Consumer Proposals good or bad). The fact is you may be much better off in bankruptcy considering, on average people, filing bankruptcy or a consumer proposal still keep their home. (you need to know how to keep your home in bankruptcy)

They also claim — “Our average reduction saves the client 60% of the original balance.”

So let’s run some numbers:

Suppose you owe $80,000 on lines of credit and credit card debt.

If they save you $60% — you will have to pay out $32,000 in lump sum settlements.

Theoretically you will save $48,000, but wait, remember their fee is 50% of the saved amount or in this example — $24,000.

HST is due on that amount $24,000 @ 13% — add another $3,120.

That means ($32,000 settlement amount + $24,000 fees + $3,120 tax) = $59,120.

Now you are paying at 74% of your $80,000 debt

Realistically you need a mortgage for this amount plus the cost of borrowing.

Since you have bad credit you will only qualify for a 2nd mortgage with a private lender —  current rates average 15% plus 2% lender fee plus broker fee average another $1,500 plus legal costs to register the mortgage et cetera — average $1,500

Round off the mortgage to $60,000 plus lender fee $1,200 and we get (60,000 + 1,200 + 1500 +1500) or $64,200 @15% for 1 year or $9,600

Total needed $73,800 or 92% of what you owe.

You need to do the math before signing on these porous lines.

What will the broker get for this? Well, they get $12,000 plus the mortgage arrangement fee of $1500 = $13,500

The debt solution company is paying for your referral at 50% of the fee they charge you to the referring agent or $12,000 each.

This is a quote from their document “we offer up to 50% of our fee (25% of the savings negotiated for the client) to the referring partner.”

The fee fluctuates as some creditors don’t settle for the 40% offer.

Also these companies seldom care if all of your debt is not settled. Quite often creditors refuse to settle and continue their own collection action.

Read this quote on limited liability:
LIMITED LIABILITY

Signator understands that in certain cases negotiations will fail, in which case Signator hereby releases and indemnifies “the company” from any and all claims by the Signator for a failure to achieve such an understanding with creditors. In addition, Signator understands that although “the company” will act as Attorney-in-fact on behalf of Signator, no liability is assumed by “the company” for any claims or damages against Signator by creditors, past present or future. “the company” assumes no liability for any creditor action initiated as either direct or indirect result of ‘the companies’ efforts.

To establish themselves as a ‘Licenced’ entity and pretend they are not ‘Collection Agents’ they make statements like this:

“anyone charging a fee for such a service must be licensed by the Ministry of Consumer Services — Protection Branch. The license is offered as a Collection Agency license and governed as such, meaning all stipulations of the Collection Agencies Act and Regulations apply”

Contact the registrar for Collection Agents and Collection Companies and they will tell you there is no such ‘Licence’ in existence.

For a free consultation by an Accredited Insolvency Counsellor and fully LICENCED Mortgage Agent please contact us at here or call 613-475-6480

Yes, You Can Live Debt Free

Posted by PattiM on

Sometimes fear can just paralyze us from taking action we need to take. I’ve met with many people who desperately need to deal with the debt situation but are just terrified of taking action. What is the major fear? They are terrified that taking action to restructure their debts will mean they wont have access to credit. It doesn’t seem to matter they don’t currently have access to credit, they are terrified of having to rebuild a credit rating.

Believe it or not, living without credit can be a liberating experience. I’ve had clients over the years who come into my office for their counseling appointments on cloud nine. They have embraced the credit free lifestyle and are very proud of themselves for having done so.

Benefits of Living Without Credit

  • You never have to worry about answering the phone. Your cash wont be calling you to find out when you are going to make your payment.
  • You don’t pay extra when making a purchase. When you buy on credit, you have the cost of the article, service charges (if applicable) and most importantly the interest to pay. Sometimes that would mean the article actually cost you double or triple its original cost.
  • You can ask for discounts when paying cash. When you pay cash, stores aren’t paying the surcharge on handling your debit or credit card. Sometimes they will give you a discount if you pay cash.
  • You never have to worry about repossession or foreclosure.
  • You don’t have to wait on credit approval.
  • When you sell an asset the money is yours, not dispersed to a creditor first.
  • You never have to worry about where the money for payments will come from WAIT! There is more to read… read on »

Are Your Debts Giving You Nightmares?

Posted by PattiM on

We’re being hammered by a recession, jobs disappear in a flash but the debts we owe continue to climb. What is a person to do?

You’re used to being able to find credit and the first impulse is usually to go find more credit — consolidation loans or home equity loans. With interest rates being low, that seems to be a logical way to deal with those debts, as long as you are working and the rates stay low. In this volatile economy, you have no guarantee either a job or low interest rates will be stable.

There are options to dealing with your debts based on your ability to pay. The most important step you can take right now is — DON’T Panic! Take a deep breath and take a good look at the situation. WAIT! There is more to read… read on »