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Category: Debt Settlement Companies

  • The Difference Between Financial Consulting Companies and Debt Settlement Companies

    The number of debt settlement companies in Canada seems to have risen dramatically over the past five to 10 years. With more and more Canadians finding themselves struggling with debt, it’s a sign of the times that companies offering debt relief have increased in number. In this post, we’ll focus on what to look for when it comes to legitimate debt relief versus going to one of the many debt settlement companies out there.

    Many people are signing up for debt settlement programs because of the way the companies almost guarantee an easy way out of debt problems. However, there are several problems with this option, especially when the debt settlement company you choose is not completely open and honest, or less than reputable. In this case, you could easily end up with more problems than you started with.

    For years, warnings have been issued by consumer protection agencies and governments alike about the perils of working with these operators. Debt settlement companies claim to negotiate with creditors on behalf of consumers and arrange payment schedules or settlements. The typical debt settlement company’s solution involves you paying them money monthly (instead of your creditors) and then when they have enough they will endeavour to make a settlement with your creditors.

    The problem is that many of these companies ask for money up front and you must pay fees to the companies for their services. Unfortunately, there have been many instances reported where consumers have paid into debt relief programs only to have the company disappear overnight – with their fees, but no results. Furthermore, putting off paying your creditors in exchange for paying these companies can severely damage your credit.

    Some other alarming facts to consider about debt settlement companies:

    • They only have success rate on average no higher than 10%.
    • Fees paid can often be equal to or exceed the amount you owe.

    Due to the rise of unscrupulous behaviour of several debt settlement companies, the federal government has posted a consumer alert that reminds consumers of the dangers of working with these organizations. You can read more about the federal government’s warning here: https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-help/alert-debt-credit-repair.html

    If you are in a financial pickle, your best choice is working with a professional debt consultant. They will work to protect your best interests when developing debt relief solutions. Here are four reasons to work with an independent financial professional:

    1. They provide impartial advice on a range of solutions.
    2. They do not charge up-front fees and will first propose a realistic plan that suits your specific needs.
    3. They can help with complex issues such as tax debt, or other financial situations that may involve enforcement action.
    4. Along with consulting services, they offer financial advice, such as budgeting and relief programs, to help you explore all your options to becoming debt-free.

    Your financial situation is unique and different from everyone else’s situation. Hiring a good financial consultant or adviser who will work with you to develop a solution tailored to your circumstances is the best way to start on the path to fixing your finances.

    At DebtCare, we put your needs first. Before you start calling debt settlement companies, call us today for a consultation at 1 (888) 890-0888.

  • Debt Settlement Companies to be Regulated in Ontario

    After regulating industries like the collection industry and payday loans industry, Ontario is making a responsible move and will also be regulating debt settlement companies.

    Ontario made this announcement in January 2013. This regulation comes on the heels of an explosion of ‘debt reduction’ companies that charge up-front fees and will even collect money from consumers with the promise of settling debts in the future.

    The Ontario Government’s new regulations will include:

    1. Not allowing debt settlement companies to charge up-front fees when negotiating debt settlements.
    2. Limiting the amount that a debt settlement company can charge.
    3. Requiring that debt settlement companies are transparent and provide their clients with clear written agreements.
    4. Allowing a consumer to have a 10 day cooling off period in the event that the individual changes his/her mind.

    The Ontario Government has put out requests for consultation from the public, including from debt settlement companies themselves. We have long advocated for this kind of regulation. As a financial consulting firm committed to helping those Canadians struggling with debt, we have never charged up-front fees or made exaggerated claims to our customers.

    Debt continues to be a rampant problem in Canada with many consumers turning to credit to balance the shortfalls with the ever rising cost of living and transportation in major city centres.

    The idea of regulating debt settlement companies is not restricted to Ontario. It is an idea that is spreading across the country. Stated in the press release issued by the Ontario Government was the fact that Alberta, Manitoba and Nova Scotia have also introduced regulations with respect to debt settlement companies.

    Here are some other sobering facts that the Ontario Government included in their press release:

    1. Average consumer debt in Ontario is up to $25,447 in the second quarter of 2012, compared to $24,721 in the second quarter of 2011.
    2. For every dollar Canadians earn, they have $1.64 in unsecured debt (Statistics Canada).

    These figures substantiate why there are more than 20 debt settlement companies already operating in Ontario. Perhaps while the Ontario Government looks at regulating these 20 debt companies, they should also take a look at reducing the fees and interest rates that credit card, loan and payday loan companies are allowed to charge which often results in consumers needing financial help.

    There are systemic problems in this country and unfortunately the ones who always seem to get the short end of the stick are consumers.

    It is the consumers who are drowning in debt and then finding themselves in the offices of debt settlement companies looking for relief. These are the same consumers who (depending on their choice of debt settlement company) may also end up in a debt reduction program that doesn’t make sense or whose fees are sky high.

    So regulate, regulate, regulate we say! We support any effort on the part of the Ontario Government to see Canadian consumers get fair treatment.

    For more information about debt settlement companies or if you have a debt problem and need help, please call 416-907-2582 or visit www.debtcare.ca.