Prior to the pandemic, Graciella Gomez relied on two jobs to keep up with her costs. After losing her part-time job at Macy’s in March 2020, she had to choose between paying a credit card and paying rent. She chose the latter.
“I didn’t know who to talk to and who to contact. It was embarrassing,” Gomez said.
An ad for a debt settlement company appeared in her social media feed, promising to reduce her debt. After following up, she says it was a proceeding from one of her credit card companies in March. She is still fighting today.
“I didn’t know who to talk to and who to contact. It was embarrassing.”
As California emerges from the pandemic, some inhabitants Face catastrophic personal debtEven if many of the state’s wealthiest inhabitants see their wealth grow. Among the financial winners is the fast-growing debt settlement industry, which is primarily made up of online companies that promise to reduce personal debt by negotiating with banks and credit card companies on behalf of their customers. There is. However, consumer advocates point out that these companies often prey on financial despair and do not warn customers about potential consequences such as reaching court.
California State Legislatures are now considering legislation that will tighten the industry after significantly overlooking personal debt from credit cards and loans. Pandemic era law Focuses on reducing rent and utility debt. Invoice Has a long-standing debate in the Capitol about whether alternative financial services such as payday loans, debt settlement, and credit repair are financial predators or a necessary lifeline for Californians with little or poor credit. Is being revived.
Oakland Democrat Buffy Wicks, who drafted the bill, argues that existing federal regulations are not sufficient to protect Californians.
“If they work with these companies, make sure they give consumers transparency and empowerment in the process,” Wicks said.
Debt settlement mechanism
After her first call to debt settlement company ClearOne Advantage, she said she was impressed that the company would repay all of her debt and that she only had to pay the company once a month to repay it. It was. Balance.
“She made it easy to hear.” We are here to help you … your life will change. It will be very easy. “And I believe it. “Gomez said.
ClearOne Advantage declined to comment on Gomez’s experience. The company said it was testimony from a satisfied customer, but refused to provide Cal Matters with contact information so that they could be interviewed.
Desiree Nguyen Orth, director of Consumer Justice Clinic at the East Bay Community Law Center, explained how most debt settlement companies work.
Customers who have a debt settlement plan pay monthly to the debt settlement fund. According to Nguyen Orth, debt settlement companies wait for customers to default (which…
Read More: California Moves to Regulate Booming Debt Settlement Industry