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Comment by patio11 | Hacker News Reader

This part made me skeptical (wouldn't a professional debt consultant be better at negotiating good terms than your average layman?).

If you assume the debt consulting is working for the debtor, then yes, it would be reasonable to assume they would be better at negotiating terms than the average layman. There is a very dangerous assumption in this sentence.

If you ever have a credit related problem, and are considering talking to a credit counselor, jump into a vat of pond scum. There, I just saved you several thousand dollars, and you'll feel cleaner in the bargain.

(Serious advice: you will get better advice from either a lawyer or the Motley Fool Credit Cards and Consumer Debt forum than from credit counselors.)

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I spent ~4 years working for a UK charity that provided a free debt advice service and I assure you that it's perfectly possible to get free high quality debt advice from somebody who is not going to derive a financial gain from the advice they give you.

The problem you are referring to largely comes from the businesses trying to sell people IVAs etc. Those products are not bad in themselves but they are heavily mis-sold to people who should really be going bankrupt instead.

web forums are sometimes OK for advice but it's a bit iffy in my experience. I wouldn't use a lawyer - very costly and usually a little outside the scope of their regular work.

It's great that other countries have legitimate debt counseling services, especially when it's free. Unfortunately from my personal experience (years ago during my school days), I haven't seen a decent US based debt counseling service; even the "non-profits" were slimy. (Maybe things have changed, but since this venture is around; I have my doubts.)

1) They are ridiculously expensive. They base their fees as a percentage of your total debt. Most of these organizations refused to talk to me simply because I had less than $10,000 in credit card debt. To me this was the first sign that the majority of the industry in the US was a scam.

2) One of the key benefits they offer is interest rate and payment renegotiation. I do not believe it was much different from you calling the credit card company yourself and simply asking for it. I know first hand because I asked what rates these companies could offer me and I was able to get that rate or even below with one phone call (to each of my credit card companies). This simple service wouldn't be so horrible and unfair if the fees weren't so exorbitant.

If after they renegotiate the terms of your credit debt, and somehow the credit card company jacks up your rate again (even if you have done nothing wrong in that period): a) they do not monitor your debt, and b) they will not renegotiate the terms. The only thing they really monitor is your payments to their organization. I vaguely remember reading some fine print that they wouldn't be liable for missed payments (their fee and your credit card payments, are billed as one payment to their organization - they pay the credit card companies for you).

3) There were even nastier sketchy organizations that were essentially asking you to default on your unsecured debt. The service they provided was just to redirect your official phone number and address to their office, so you wouldn't have to deal with people harassing you for repayment. On the surface, they only asked for 10% of your debt and they didn't have a minimum limit. However they wanted you to make payments to their company for the full amount of your credit card debt as a 'savings account' that you would get back (minus their 10% fee); which happens only after you paid your total debt amount in full (to them). Honestly I wonder if they would even give your 'savings' if you did pay in full after your credit was completely ruined.

If this company is sincere, I really hope they succeed. That industry desperately needs an honest company.

Thanks for your reply. I've seen many of the problems you mention in the UK too (except for 3 which is totally evil).

I'm surprised the US doesn't have a charity offering a similar service to what we do in the UK; over here debt advice is a regulated industry and registered advisers work for a wide range of organisations - charities, local authorities etc. A friend of mine even interviewed recently for an gardening club that wanted to hire a debt adviser to help it's members.

With respect to (2) you are totally right. If you phone your bank asking to reduce the size of your payments they will jump at the chance to do it. The reason is simple - reducing payment amounts increases the lifetime of the loan and therefore increases your overall amount of debt.

well it was also an interest rate reduction as well as a payment amount reduction. I was able to take 6-8 points off from my various creditors at the time.

That's exactly right! in fact credit counseling as it exists today is essentially "client-side" collections. We're essentially trying to change that by 1. recommending behavior modification techniques focused around budgeting and responsible spending, 2. finding current avenues to find savings from creditors and reduce your monthly burden and so you see an immediate benefit and 3. reduce your long-term dependence on credit, at all. In a sense we are compiling the best advice out on the market today and packaging it into an easy to use software and guides you through the process step by step.

Good luck and godspeed.

Completely agree. It made me cringe to read that the founders are already "credit councilors." It's possible that they could have the debtor's interests in mind, but unlikely given the state of that industry.

The best advice I have found is from Dave Ramsey. http://www.daveramsey.com

I would agree with you here, and I hope you will judge us on our product rather than the "state of the industry" One HUGE difference between ourselves and credit counselors is that we don't get any sort of pay out from creditors, our clients are the only ones we have a responsibility to, whereas credit counselors, even non-profits, take what's called a "fair-share" fee from creditors, which is basically a % "donation" based on how much the credit counselor collects. We believe this aligns our incentives a lot closer to our customers!

For what it's worth, businesses that fix incentive alignment problems fall firmly into the "things I want to see more of" category. CarWoo is a good example, I hope you guys blow it out of the park.

Dave Ramsey's books (audiobooks, in my case: I downloaded the Total Money Makeover [ http://www.audible.com/pd?asin=B002UUKIR8 ] with an audible credit when Merlin Mann mentioned [but did not endorse!] Dave by pointing out that he will not accept credit cards for payment on his website since he does not think anyone should have or use a credit card [ever]) are what enabled/motivated me to finally get out of debt and save up enough money to start Falcon Empire.

Apologies for the multiple run-on sentence.

Are you speaking from experience or just from watching all the scummy TV commercials and hearing about the related litigation?

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