Not All Debt Programs are Created Equal: How Debt Settlement Compares to Other Debt Solutions

GET ME OUT OF DEBT! THE EVOLUTION OF DEBT PROGRAMS PRODUCED BY CENTURY NEGOTIATIONS, INC. // www.CenturyNI.com $15,950 PROGRAMS DEBT SETTLEMENT The process by which a service provider, working on behalf of a client, negotiates the settlement and final discharge of the cli- Average Household Consumer Debt in America ent's unsecured debt. Bankruptcy DEBT CONSOLIDATION Consolidation entails taking out one loan to pay off several other loans. This is often done to secure a lower interest, secure a Reform Act 2005(Z Makes it More Difficult and Expensive for Consumer to Seek Discharge of Debt fixed rate, or for the convenience of servic- ing just one loan. $2.84TRILLION CREDIT COUNSELING Consumer credit counseling helps to re- build and reestablish your credit by creating a debt repayment plan that you can afford. Credit counseling is not a quick fix, but can be helpful in rebuilding credit. Total Consumer Debt in America (June 2013) How Long Does it Take to Pay Off $15,950? SETTLEMENT* CONSOLIDATION* COUNSELING* Time to Pay Off (Months) Monthly Payment Total Paid * Assumes a Fee of 20% of enrolled Debt and an average settlement percentage of 51.3%. Aside from your monthly payment and total amounts needed to pay off your debt, as shown above, there are other factors that you should consider. * Assumes good credit, sufficient home equity and * Assumes a fee of the lesser of $50 per month or 15% of client payment. Assumes interest rate of 9% based on inquiries with three separate credit counseling organizations. no change in interest rate of 6% over the term and costs of 5% of loan value. How Has Debt Settlement Has Evolved? The Association of Settlement Com- While debt settlement was available panies (TASC) is formed in 2005 for the purpose of articulating clear and fair operating standards for the debt settlement industry. for commercial enterprises for many years, it only became widely avail- able as an option for consumers in START 2003. Up front fees become the norm for companies providing debt Pre-FTC Ruling is "VERSION 1.0" settlement solutions. Fees are based on a percentage On average, it took about 6 months to realize savings with the business model based off of up front fees. of the debt a Client enrolled into the program (commonly around 15% of enrolled debt). Fees paid were generally nonre- fundable, or refundable only partially. The Bankruptcy Reform Act of 2005 makes the debt settlement industry for consumers take off. Post-FTC Ruling is "VERSION 2.0" A ruling in October 2010 by the FTC bans the "advanced fee" model by settlement companies. Client savings rise dramatically after a 24 month period on for the next 12 months (36 months total). The Reform Act makes it much Banning advanced fees shifts the client-side risks and the risks become entirely absorbed by the service providers. Since 2011, industry has seen a gradual increase in enrollment. more difficult and expensive for a consumer to qualify for bankruptcy. TASC becomes the American Fair The AFCC works to establish fair Credit Counsel (AFCC) following the 2010 FTC Ruling to reflect a new and 2010-Forward and regulatory transparent frameworks for the undustry. expanded mission. $4.40 70-80% $5 BILLION On average, clients realize $3.15 in Debt Reduction for every $1.00 of Fees. Com- pleted Clients realize $4.40. Of settlement businesses The total enrolled debt be- stopped accepting new cli- tween Version 1.0 clients ($3.3 billion) and Version 2.0 clients ($1.7 billion). ents or went out of busi- ness altogether after ruling. Debt Settlment Enrollment (by Quarter) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2006 2007 2008 2009 2010 2011 2012 While becoming debt-free is the hard part, once you're there, it still takes tremendous dis- cipline to stay out of debt and live a healthy lifestyle from a financial standpoint. Make a budget and stick to it, pay off your balance each month, do not live beyond your means, and save for the future. Put these principles into practice every day! Credit and Sources CNI 1. "Options for Consumers in Criss: An Economic Analysis of the Debt Settlement Industry" - December 31, 2012; Hemming Morse LLP 2. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/15/five-facts-about-household-debt-in-the-united-states/ 3. http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php 4. http://www.centuryni.com/debt-calculator/ 5. http://money.cnn.com/magazines/moneymag/money101/lesson9/index.htm www.CenturyNI.com CENTURY NEGOTIATIONS, INC 42 $270.77 $11,372.35 09 $323.78 $19,426.57 09 $380.76 $22,845.61