American Debt Arbitration

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Posted: Tue Mar 18, 2008 11:38 pm

OK, Has anyone else heard of these guys?

A friend of mine called today for advice. He is aware of what I do here, finds it amusing, and occasionally engages in desultory Lad Slapping himself. He's fond of collecting checks! However today he called to ask for advice on this company. Here's the setup:

He is in debt but so far can make payments. A large medical bill is a problem as well as some high interest CC debt. Not good but so far manageable.

He gets a cold call and the girl goes into her pitch. She will cut his debt up to 50% he will initially have bad credit but it will work out fine in the end. There were of course buzz words and the usual we're working for you blather thrown in as well.

The points that set me off were:

He was advised to stop paying his CC and medical bills for at least three months. If called he was to refer the callers to A.D.A and say the debt was in arbitration. Remember up to now he still has good credit and is making payments.

He was told there would be up front fees for filing and paperwork.

He was told that ADA would take money from his bank account, hold those payments for a time and then settle with a CC company.

He was told that initially his credit would 'get bad' but in the end if he stuck with them everything would work out fine. If he stuck with them was repeated.

Umm, he might said a few other things on the phone but at this point I couldn't hear him because the alarm bells were so loud. So I told him to give me a few minutes on Google to see what I could come up with. Oh yes, he mentioned that he had already agreed to do this by the way and had given out his bank info.

I spent about 30 seconds on google and came up with a DESIST AND REFRAIN ORDER from California http://www.corp.ca.gov/ENF/pdf/2005/Nationwide.pdf

So I printed it out and went to see him.

Now, he did call to cancel the agreement and was given a cancellation number. Tomorrow he said he was going to the bank to close his account and open up a new one. He's going to bring a copy of the D and R to the bank by way of explanation.

He asked me if the D and R was all I had however. Seems he thinks this company still might be on the up and up and so on. And in my Googling I couldn't find any examples of people shouting about losing their money with these guys. In this case my instincts and the California order were enough for me to get involved and talk him out of it.

So, has anyone else heard of these people? Where can I find some more information? And so on.

Thanks All !

Baiting Guru Joined: 03 Mar 2006 Posts: 7103 Location: Yes

Wow -- what a bad idea. Giving a 3rd party control over your bank account to pay your creditors.

There are legit debt counselors and/or consolidators, but all they do is negotiate your debt on your behalf. You control all payments. There is no such thing as "debt arbitration" -- if your creditor agrees to arbitrate, then that's one thing, but you can't force a creditor to do that.

If it's not a scam, it's an awful idea.

Posted: Tue Mar 18, 2008 11:49 pm

It's a scam.

There used to be an article about it on http://www.quatloos.com/.

Do some googling, you'll find it.

If I recall correctly, it's more of a political scam than a money scam.

Whatever, the victim loses in the end.

[edit:] As far as Quatloos is concerned, I was thinking of this: http://www.quatloos.com/tax_protestors.php.

It's still a scam never the less. Google some more.

Posted: Wed Mar 19, 2008 12:23 am

^^^ Fun site!

Thanks!

Posted: Wed Mar 19, 2008 12:37 am

yeah have him listen to dave ramsey www.daveramsey.com
he has a good plan to help those get out of debt and he is good to knock sense into you .

but yeah if he isnt late.. dont become late... credit reports take 7+ years to get off all the bad marks

Hello I'm New here! Joined: 18 Mar 2008 Posts: 15

If you really don't care about your credit score and just want to get out of paying debt, you just declare bankruptcy. I suspect that's what this deal involves. I don't know how else they'd make the debt go away.

Not a good idea, if you can possibly avoid it. Having no credit is no fun.

Posted: Wed Mar 19, 2008 4:33 am

I can tell you from experience if you dont mind your credit being screwed up for a few yrs ... instead of filing bankrupsy... stop paying for a few to several months... let it go into collections... refuse to talk to collection agencies and deal directly with the debtor ... you can make collection agencies stop calling but not the original debtor... (there is an act or a law)... i cant remember exactly the name but you dont have to deal with a collection agency have them send it in writing and you can then respond back to the collection agency that you refuse to deal with them and find the act referring to this... they will send the debt back to the original debtor as not able to collect...then contact each creditor and play lets make a deal... get it in writing from them 1st that you will settle the debt for X amount of dollars if removed from your report... in most cases you can cut your original debt from 1/3 to 1/2 but have to come up with the lump sum... at this point they will settle for something rather than nothing ... your credit will be screwed for a while but not as long as a bankruptsy... if you file ch11 you will be set up on a payment plan anyway... ch7 will wipe the debt away completely but i believe the ability to file a ch7 has gotten harder.

but this was my experience in the late 90's... things could have changed by then too... I did this and it took me about 3-4 yrs to clean up my report completely... but it was better than the 7-10 yrs with the bankrupsy

good luck either way
Wink

Posted: Wed Mar 19, 2008 4:49 am

well if you dont care about your credit score.. dont let it go to collections...

the card companies will sell the debt to them for a fraction of the debt.
Call them up see if you can work out a debt settlement plan.
Tell them of hardship, you cant pay..
say if its $10000 offer $5000-6000 or so. (if you can)

these commerical things are just scams... they just do what i said to do on your behalf.. its just EASIER to do after you miss a few payments

Also have him open an account at ANOTHER bank.. the way banks work if you chance accounts they can cross-ref with the other and take money out that way.. (though this may be diff at a bank with 1 or 2 branches that is really really small) if this company still decides to yank money out.

but have him call his card companies, and get a supervisor - and then start mumbling about bankruptcy.. they may offer him lower rates, or help him.. the debt settlement - will ding credit but not as bad as bankruptcy -

Also see if a credit union can maybe help with a loan to consolidate at a lower rate.. they may ask to hand over the cards and cut em up.

Posted: Wed Mar 19, 2008 5:14 am

Thanks!

One of the issues here is that he can still make the payments and keep his head above water. So so far he is in an ok position. Anyway these clowns were advising him to Stop paying and run his credit into the ground!

In other words on top of all of the other BS they were encouraging this guy to default on his payments.

Current plan is to get him and his wife, both working, over to an accountant to get a settlement on the med debt and get rid of the high interest cards.

Me personally, I'm a bit curious about this group.

Posted: Wed Mar 19, 2008 6:55 am

Here are some links regarding American Debt Arbitration:

Rip Off Report

Search for American Debt Arbitration. There are many bad experiences told here.

Consumer Complaint

I would run the other direction. No legit credit counseling company would tell you not to continue to pay your bills. Thumbs down

Posted: Wed Mar 19, 2008 2:15 pm

For some odd reason I thought about this on the drive to work.

What he needs to do (if he is able) to get an extra job delivering Pizzas, or something of that nature) - use that $$ and pay down on bills.

First have him call his credit card companies and see if he can get a lower rate.

Second - Pay at LEAST the min on all debts. - BUT if you have extra cash - Pay off the smallest debt first, then when that is gone, pay off next smallest and so forth.. that way say if you have $3000 debt with $100 min payment and $5000 with $150 min payment.. pay say $200 to the 3000 and still $150 to the 5000

Then when you pay off the $3000 you can put $350 to the $5000 debt..
as you see things will get rolling fast!

May need to cut back on eating out (if they do) and buy store brand instead for awhile.

But since hes above water, not late, not in major trouble - the advice that company gave is financial susicide!

AND bad credit can cause your Insurance rates for Car/Home to go up or could cause you to be dropped.

And on the credit cards - I think its www.bankrate.com has a way to search for the cheapest rate.. (but check a local credit union first!)

Hope this helps - i know i repeated myself from above posts.. but dont want to see this guy that is still above water doing okay.

Posted: Wed Mar 19, 2008 2:18 pm

I cannot speak specifically for this company, but what many of these consolidation places do is this...

They get you behind on your payments. That makes you look like a non-paying deadbeat. Then, this company, on your behalf, writes to the collectors of these debts and says, "Hey, Mr. X cannot pay the full amount. However, he will pay you fifty cents on the dollar for the debt."

So, not really a scam, but not very nice. If he signed up for those credit cards, he is obligated to pay them. If it's getting tough, have him call the credit agency and see if he can work out something.

Lester's advice is prefect.

Posted: Wed Mar 19, 2008 2:25 pm

My son inlaw is useing one of those places to get rid of his credit card det and it has been all positive so far , he has settled 3 cards for about 35 cents on the dollar and has 2 yet to go.

Posted: Wed Mar 19, 2008 7:25 pm

@ JoJobean:
I see your point but I'll consider this a scam. Maybe legal but still a scam. Like going to the doctor with a sore knee and being told to break it and then come back.

Anyway this guy still thinks it might be worth it to work with this company. Shocked

Currently the wife is running her own business and he is working two jobs. So they have income to work with. It's simply a matter of what to focus on and how.

So I'll need to get some examples together. He has a family and they are planning to buy a house in the near future. For some reason he feels that if he goes with ADA he will be debt free in a year or so with good enough credit to purchase a house.

Thanks for the resources and examples

EDIT Note: PS thanks lester! That is pretty much what I will be advising them to do now.

Posted: Wed Mar 19, 2008 7:56 pm

The main thing is that your friend communicates with his debtors. They will work with him to set up a payment plan that will help him out. They can reduce his monthly payments on his CCs which would help him pay off his medical bill. There are lots of books at the library which will help him out. Right now he is in good standing and to stop paying his bills would be wrong. So many bells and whistles will go off that it will affect him in other ways.

Posted: Wed Mar 19, 2008 8:34 pm

WOW if he goes with ADA he wont get the home! - or not at a nice interest rate....witht he crackdown on who they loan too now..

Posted: Wed Mar 19, 2008 8:47 pm

I did it as described above... it took only 3 yrs before i could get good rates from lenders but at the 3 yr mark I did get a home loan with countrywide at a very good rate for the time period... 185K with 3% down plus closing costs at 6.125%

the main thing that you need to do is make your deal, get it in writing that they will agree to remove it from your credit report. I see some saying that the creditors will work with you... I did not get that kind of service when i tried that route... but give it a try first... good luck

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