When you start shopping for a home loan, it might be easy to assume that all lenders are the same. After all, they all have mortgage brokers, paperwork, and impressive offices. However, when you really start exploring the details, you might discover that lenders all have something different to offer. On my blog, you will learn more about financial terminology, so that you can determine what you are getting into when you sign the terms of an agreement. This information is presented in an easy to understand, friendly way, so that you aren't bombarded by terminology and industry jargon that you don't understand.
On July 1, 2015, Ontario joined 3 other provinces in adopting national recommendations for debt settlement reform. These reforms significantly increase the debt settlement companies' cost of doing business, and many have been forced to close their doors. Others have reorganized themselves or taken on additional partners to help them avoid these new regulations while still providing debt settlement services to clients in need. Read on to learn more about these changes to the laws governing debt settlement companies, as well as your available debt management options.
What changes were made to Ontario's debt settlement industry?
The Collection and Debt Settlement Services Act made some major changes to the way debt settlement companies are permitted to operate. One of the biggest changes was the interest rate cap -- debt settlement companies are now only permitted to collect a fee of up to 15 percent of the total amount of debt settled. Ironically, non-profit debt settlement companies may charge up to 20 percent from the borrowers served.
As a result, many debt settlement companies have already gone out of business, unable to sustain their business models on these reduced fees. Because lending to clients with high debt loads is often a risky proposition, these companies may have difficulty paying overhead or funding services for additional clients without being able to charge higher fees.
What should you do if you need help managing your debt?
Many of the debt settlement firms targeted by this new law have reorganized themselves into different types of businesses. Some have partnered with law firms, which aren't subject to this 15 percent rate cap and can offer additional services (like legal assistance in filing bankruptcy) in a "one stop shop."
These new partnerships can provide advantages to consumers. If you're interested in reducing your debt, but aren't sure your situation merits bankruptcy, you may be able to work with a debt settlement company and retain the option to file bankruptcy if your debt settlement fails. Because this business will already have your information and credit history on file, you'll be able to reduce the amount of time an attorney needs to work on your case, thereby reducing the fees you pay.
Even if you find yourself paying more than 15 percent in fees on the front end, if your debt settlement doesn't work out, you'll be able to eliminate your outstanding debt and start fresh--and if your settlement does work out, you'll be able to significantly reduce the amount of total interest you pay.
For professional help with debt settlement, contact a company such as Vine & Williams Debt Settlement.
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