Debt be not proud

IF YOU HAVE over $10,000 in credit-card debt, you may be paying close attention

to a slew of radio ads that have recently hit the airwaves. These ads suggest that recent Obama administration legislation will help qualified consumers wipe away half their debt.

Since the average outstanding credit-card debt for households with credit cards was $10,679 at the end of 2008, that means the audience for this message is potentially huge. And that's worrisome, since many of these ads are misleading at best.

For example, the ads are often worded to suggest that stimulus money or the Credit Card Act that just went into effect are government programs to help wipe out consumers' debt, and that the altruistic companies advertising their services will guide you through the program.

Consumers should beware. Many of the companies touting their services are debt-settlement firms that charge big fees to work with lenders to arrive at a settlement figure lower than what is actually owed. But the way to get there is hardly easy; often, a consumer makes a modest monthly payment for many months to the settlement agency. When a certain amount of money is accrued, the company tries to arrange a settlement with the lender. But such settlements are not guaranteed. Meanwhile, you ignore your credit-card bills for months, accruing fees with the hope that it will someday be settled. If it isn't, you're still out the large fees charged by the settlement companies.

There is no stimulus money set aside to wipe out individual debts. There is no "President Obama Credit Card Debt Consoldiation Program" providing cash grants for people to pay off their bills. The Credit Card Act of 2009 mostly limits fees credit-card companies can impose, including overlimit fees. Credit-card issuers can still impose many charges, and can raise your interest rate. Many companies are already finding new ways to get around regulations and charge big fees.

Bottom line: there is no magic bullet for wiping out credit-card debt. That's not to say that consumers shouldn't seek help. Nonprofit agencies like Consumer Credit Counseling of the Delaware Valley or similar agencies that have accredited counselors can help with your entire financial life, not just credit-card debt. And they'll help no matter how big or small your debt is.

Companies that exist solely to make money off of people in trouble are bad enough in a health economy; in a bad one, they're even worse. *