A debt charge off appears on your credit bureau reports for seven years. The negative labeling also affects your credit rating. Plus, you're still legally required to pay the full balance.
Los Angeles, Calif. (PRWEB) March 22, 2010
Facing issues like the steep unemployment rate, Americans are on a bumpy road to economic recovery. Despite the high rate of credit card bill payment defaults and spike in bankruptcy filings, a win-win solution is on the horizon for many Debt Free League clients.
According to the Federal Reserve, in the third quarter 2009 the debt charge-off rate hit a record 10.1 percent. Altogether in 2009, they wrote off a record $83.27 billion in credit card debt.
Albeit the staggering losses, debt charge offs are big business for banks.
A charge off signifies a major tax exemption. Federal law allows creditors to declare noncollectable debts as a charge off, or business loss after the debts are 180 days past due. Aside from benefiting from huge tax breaks, creditors also normally profit by selling off charge off debt portfolios a debt buyer for a fraction of the face value.
Sadly, the debt charge off process is a bitterly different story for consumers.
Eric Santacruz, Vice President of the San Diego company, Debt Free League warns, "A debt charge off appears on your credit bureau reports for seven years. The negative labeling also affects your credit rating. Plus, you're still legally required to pay the full balance."
Santacruz has seen debt buyers, typically collection agencies and collection attorneys, get very nasty with their collection threats. He adds, "Unlike original creditors, debt buyers have no reason to maintain a relationship with a debtor. Many are notorious violators of the FDCPA. Their lies and and pressure can easily threaten you into filing bankruptcy."
The FDCPA, or Fair Debt Collection Practices Act, is a federal law that protects consumers from unfair or abusive debt collection practices.
A concerned Santacruz also cautions about a recent increase in violations of the FDCPA by debt buyers that engage in debt collection.
According to the Administrative Office of the U.S. Courts, cases filed by consumers or state regulators under the Fair Credit Reporting Act and the Fair Debt Collection Practices Act, jumped 53 percent in 2009.
The most notable case was in December 2009 when the Federal Trade Commission reached a record $1 million settlement with Capital Acquisitions and Management Corp for violations of the FDCPA.
The debt buyer was prosecuted for posing as a debt collector, illegally harassing consumers at their workplaces. They also claimed to be attorneys, and threatened imprisonment, seizure, garnishment, attachment or sale of a debtor's property or wages with full knowledge that such action could not legally be taken.
According to the National Bankruptcy Research Center, in 2009 personal and business bankruptcy filings jumed 32 percent compared to the filings made in 2008. However, the alarming rise is no coincidence to Santacruz.
He adds, "Oftentimes, collection threats scare victims of creditor harassment into filing bankruptcy. But getting education about your FDCPA rights is an important key to learn about one's consumer rights."
Amid the massive charge off rates, Santacruz is seeing more collection lawsuits being filed. Thus, he urges people with collection accounts to take immediate action to resolve their debts. He suggests his debt settlement program as a potential solution.
Substantial proof of the company's work is exhibited at the Debt Free League website debt settlement examples.
About Debt Free League:
Debt Free League offers a debt settlement program that helps consumers and small business owners resolve financial hardships by negotiating settlements on personal, medical, and business debts. Free phone consultations are available by calling (800) 213-9968.