NY attorney general sues debt settlement firms

1. Lending institutions and insurance companies offer various products or include various terms in loan documents that have the effect of paying off loans (or deferring loan payments for certain periods of time) in the event, for example, of a borrower's death, loss of employment, or other significant personal life changes. These are legitimate products and should not be confused with the false promises to eliminate a borrower's debt upon the presentation of fraudulent documents that are the subject of this alert.

2. The documents have variously been titled: Declaration of Voidance, Bond for Discharge of Debt, and Redemption Certificate.

3. Federal Reserve staff has seen advertised up-front fees as high as $2,500. Some programs also require the up-front payment of an amount equal to 15 percent of a borrower's total debt obligations.

4. Refer to 12 CFR 208.62.

A Debt Consolidation Loan is used to combine all your existing consumer debt or credit card debt into a single loan and one monthly payment. The advantage of this type of debt loan is that you can consolidate your high interest credit cards, auto loan and/or student loan debt, into one single lower monthly payment. It allows you to pay off your bills. Depending on the amount of debt you have you may or may not have to use collateral to secure the loan. Most people will take out a debt consolidation loan against there home and that will allow them to get a very low interest rate. With most consolidation loans you go from an unsecured debt to a secured debt which puts your personal property at risk. Unbelievably, about 75% of people that get a consolidation loan to pay off their credit cards do not close their credit card accounts down. This results in continued use and even deeper debt.

A debt consolidation loan is not always the best way to go. Since you usually have to have collateral for this type of loan, you place your assets at risk and extend your debt further into the future. Now you have a debt consolidation loan to pay for and many people are tempted to start using those credit cards again.

Charges for this service can vary greatly. It is best to check with your bank, credit union or lending institution prior to obtaining the loan.

If you pay just the minimum due each month on an $8,400 credit balance, you will wind up having to make 365 monthly payments before it goes to zero. That’s thirty years and five months’ worth of payments. And that’s assuming you never charge another dime on the card, never get hit with a late fee, and are never billed for an annual service fee.

Here’s the bottom line: You cannot become an Automatic Millionaire if you run up credit card balances and pay only the minimum due. All you’ll accomplish doing that is making the credit card company rich while you stay poor.

The easiest and most efficient way of getting out of credit card debt is to consolidate all your balances in one account and then, use half your Pay Yourself First money to pay it down. But what do you do if for some reason (say, you owe so much that no company will give you a sufficient credit limit) you can’t consolidate your debt?

The answer is to DOLP™ your way out of debt. I first described the DOLP system in The Finish Rich Workbook. The basic idea is to rid yourself of credit card debt once and for all by paying off all your balances and then closing all your credit card accounts.

In other words, your credit cards are all going to be Dead On Last Payment—or DOLP, for short. Of course, when you have a lot of credit cards, figuring out how to pay them all off can be pretty daunting. Do you pay a little on all of them at once? Or should you concentrate on one card at a time? And if so, which one goes first? This is where the DOLP system comes in.

• Make a list of the current outstanding balances on each of your credit card accounts.

• Divide each balance by the minimum payment that particular card company wants from you. The result is that account’s DOLP number. For example, say your outstanding Visa balance is $500 and the minimum payment due is $50. Dividing the total debt ($500) by the minimum payment ($50) gives you a DOLP number of 10.

• Once you’ve figured out the DOLP number for each account, rank them in reverse order, putting the account with the lowest DOLP number first, the one with the second lowest number second, and so on. You should continue doing this until you’ve DOLPed your way to being debt-free.

Setting up an automatic payment plan for your credit card debt is easy. Simply call your credit card company and tell them you would like to arrange for them to make an automatic debit from your checking account each month.

It’s hard to get debt-free—never mind rich—when virtually all of your mortgage payment is going to pay bank interest. Yet that is what happens for the first ten years of most 30-year mortgages. To put it another way, with a mortgage like that, you spend the first ten years working hard for the bank but building little equity for yourself.

But there is an alternative. If you follow the system I’m about to share with you, you could save yourself nearly a decade’s worth of work.

Here's what you do: set up a biweekly payment plan. All you need to do is call your lender (the bank that holds your mortgage). Tell them that starting next Friday you want to start paying your mortgage on a biweekly basis and so you want to know if they offer a biweekly mortgage payment plan.

Remember, this does not mean that you are refinancing or changing your mortgage. All it means is that you are interested in signing up for a service to pay off your mortgage in a slightly different manner— namely, one that will allow you to make your mortgage payments on a biweekly basis. There’s a good chance your bank or the company that holds your loan offers just such a program.

• It saves you thousands of dollars in interest payments (maybe hundreds of thousands).

• It puts you on a forced savings system.

• It makes your cash flow easier (because you pay your mortgage every time you get paid).

• You’ll never have to worry about paying your mortgage late because it’s automated.

• It cuts years off your mortgage!

Setting up one of these programs yourself is pretty darn easy. If your mortgage is with one of the larger banks, they will probably refer you to an outside company that runs the program for them. For a one-time set-up fee of $195 to $395, plus a nominal transfer charge, this outside company will totally automate the process for you.

The three most important questions to ask a service company before you sign up for their biweekly mortgage plan are these:

•What do you do with my money when you get it?

•When do you actually fund the extra payments toward my mortgage?

• How much will it cost me to use the program?

These three questions are critical, and here’s why. Some companies hang on to the extra money you’re putting toward your mortgage and actually send it to your mortgage holder in a lump sum once a year. That’s not what you want. You want a company that makes extra payments to your mortgage as soon as possible. This way your extra payments are paying down your mortgage faster. You also want to understand how the costs involved compare to the savings you will realize so you can make an informed decision.

The single most important investment decision you ever make may well be how much to automatically Pay Yourself First into your retirement account.

Other than buying a home (something we will cover later), this one decision can do more than any other action you may take in your life to determine whether or not you will become rich.

With this in mind, it shouldn’t be hard to figure out the single biggest investment mistake you can make: not using your plan and not maxing it out.

People who aren’t serious about being rich say:
• “I can’t afford to save more than 4 percent of my income.”
• “My spouse is enrolled in his/her plan, so I don’t need to enroll in mine.”
• “Our plan isn’t any good, so it’s not worth using.”
• “My company doesn’t match retirement contributions, so signing up for the plan isn’t worth it.”
• “Investing in stocks is foolish.”
• “I’ll save more later.”

Serious wealth builders say:
• “No matter what, I will pay myself first.”
• “I will pay myself first at least 10 percent of my income and strive to contribute the maximum amount I’m allowed to my retirement account.”
• “I will make sure my spouse is doing the same.”
• “I understand that when the stock market goes down, it allows me to buy stocks at bargain prices . . . and that’s a good thing.”
• “I know the time to save for tomorrow is always today!”

Pretax retirement plans are where all wealth starts. Yet according to a November 2002 survey by PlanSponsor.com, one out of every four American workers who are eligible for retirement accounts hasn’t even bothered to sign up. When it comes to assuring their futures, these people are not even in the game. They are watching from the sidelines. If you are one of them, consider today your sign-up day.

Contact the benefits office at your employer today and ask them for a retirement account sign-up package. It was probably given to you when you first started work—and because it was inches thick, you may have put it aside and said, “Too busy. I’ll look at this later.” If that’s what you did, by all means go get yourself a new package. The rest of this chapter will explain exactly what to do with the forms your benefits office will give you.

As I write this, the United States is breaking all records for personal bankruptcies, with more than 1.5 million in 2002. And in future years, it’s only going to get worse.

Why? The answer is simple: We simply don’t maintain the same cushion of emergency money that our parents and grandparents routinely stashed away. Instead, we are literally living paycheck to paycheck.

To make sure this never happens to you, I’m going to show you how to build an emergency basket of cash AUTOMATICALLY. Grandma Bach used to tell me, “David, when the going gets tough, the tough have cash.” In this, as in so many other things, she knew what she was talking about. Cash is king. Cash is security. Cash is protection. Cash is your “take this job and shove it” option.

You may never plan on losing your job or becoming disabled or having your house burn down, but like I said, stuff happens. It always has and it always will. Fortunately, that doesn’t mean you have to be worried all the time. There is a way to protect yourself financially from the uncertainties of life. How? By surrounding yourself with a cushion of money.

But here's an important caution: don't let the bank get rich off your money. Banks love it when people set up emergency funds for themselves. That’s because most people put their “rainy day” money in savings and checking accounts. Why is this a bad deal? Because most savings and checking accounts pay little if any interest.

What you want to do with your emergency money is put it in a money market account that pays reasonable interest. A money market account is one of the simplest and most secure alternatives around for anyone who wants to put aside some cash and earn a reasonable return on it.

Just a few years ago, you generally needed a minimum of as much as $10,000 to open a money market account. Because of this, many people still mistakenly think these accounts are for the rich. In fact, you can now open most money market accounts with a minimum deposit of between $1,000 and $2,000—and in a few selected cases with as a little as one dollar. That’s right—just one dollar.

There are thousands and thousands of books about money. They all promise to teach you how to get rich. Chances are, you already own some of these books. Chances are, you bought them with good intentions but either never read them or, worse, tried to read them but found they confused you or put you to sleep.

This book won’t confuse you and it won’t put you to sleep. It is simple and straightforward, and in just a few hours it will teach you everything you need to know to become an Automatic Millionaire.

The philosophy behind The Automatic Millionaire:

1) You don’t have to make a lot of money to be rich.

2) You don’t need discipline.

3) You don’t need to be “your own boss.” (Yes, you can still get rich being an employee.)

4) By using what I call The Latte Factor®, you can build a fortune on a few dollars a day.

5) The rich get rich (and stay that way) because they pay themselves first.

6) Homeowners get rich; renters get poor.

7) Above all, you need an “automatic system” so you can’t fail.

What it all boils down to is this: If your financial plan is not automatic, you will fail! An investment plan that requires you to be disciplined and stick to a budget and write checks manually every couple of weeks simply will not work.You have a busy life.You don’t have time to sit down every few weeks and figure out how to save and whom to send checks to. Haven’t you already tried to budget and save? It’s not working, is it? Yet this is what most Americans are trying to do. It is a recipe for frustration and failure.

There is, however, a simple solution. The one way to create lasting financial change that will help you build real wealth over time is to . . . MAKE YOUR FINANCIAL PLAN AUTOMATIC! Making your financial plan automatic is the one step that virtually guarantees that you won’t fail financially.Why? Because by making it automatic, you will have set yourself up for success. And as you will learn in this little book, you can do this in literally minutes.

What do I mean by a plan that is automatic? I mean a plan that, once you’ve set it up, allows you to go about your life and not spend a lot of time thinking—or, worse, worrying— about your money. You know why this matters? Because ultimately what is missing in our lives today . . . is a life! Make your financial plan automatic and one of the most powerful things you will get out of it is worry-free time—which ultimately means getting back more of your life.

If the idea of becoming an Automatic Millionaire with a simple, totally automated plan appeals to you, then you have come to the right place. Don’t worry if right now it sounds too simple. As you’ll see in the next few hours, because of its unbelievably simple approach, this is an unbelievably easy book to get through.

So let’s get started. In just a few hours, I think you’ll be pleasantly surprised by how much your thinking has changed—and how ready to take action you are.