Question: Entering into credit counseling with a debt management program or … ?

I am entering into a debt management program with a credit counseling company. I have about $17,500 in debt and my payment with the company would be about $400 a month.

My question is, would creditors be willing to accept 1/2 of the minimum balance that is due actually? I have 3 cards I’m in debt with, $285/month, $185/month, $165/month respectively.

I’m already 2 payments behind with 2 of the cards. Would the credit card companies accept a personal offer of 1/2 the usual minimum for a certain time frame? So I’d offer them $142.50, $92.50, $82.50.

Or since I’m already behind on payments should I stick with the debt management program (I just signed on and have to make my first payment on 2/28) and wait until I’ve been in the program a few months and then try to talk personally to my creditors and see what I can offer at that time??

Please advise. Thanks.

I, the AKPK DMP blogger, chanced upon this interesting article, ‘Those Bloody Banks, Credit Card Companies and Bank Negara!‘ by Fahri Azzat at loyaburok.com, at The Malaysian Insider.

You may have missed this article that relates how banks and credit card companies can be so unreasonable when it comes to credit card terms. Enjoy reading!

(Source) JAN 16 — Diana Chee Vun Hsai, like many of us owned a credit card. She had two. One from Citibank Berhad, the other from HSBC Bank Berhad. On 7 September 2008, HSBC called up her to alert her about her credit card being used. When she checked her purse, she discovered both her credit cards were missing. She notified both the credit card companies of the loss of her credit cards on the same day and lodged a police report at Dang Wangi police station about it the following day. She understandably thought that was the end of the matter. She was wrong.

On 16 September 2008, Citibank told Diana Chee Vun Hsai they were billing her for the unauthorized transaction of RM 1,859.01 done on 6 September 2008. She responded through her solicitors to inform Citibank that the limit of liability for a lost credit card was RM 250.00 as provided in clauses 15.1, 15.2 and 15.3 of the Bank Negara Guidelines BNM/RH/GLO-041-01 (“the BNM Guidelines”). Citibank’s lawyers replied pointing out to her that the terms of her credit card the crux of which is as follows:

“Our client imposes a duty on the cardholder to notify the loss one (1) hour prior to the unauthorized use and to provide proof of acting in good faith and exercising reasonable care and diligence to prevent such loss or theft of unauthorized use of the card before our client can exercise its discretion whether to resolve the liability or not. Such a clause is not in contravention of the Bank Negara guidelines.” (emphasis mine)

I have emphasized that portion to demonstrate just how unreasonable banks can be; to limit your losses arising from the loss of your credit card to RM 250.00, you have to inform Citibank one hour before the unauthorized transaction takes place, which you would naturally know nothing about. Additionally, you have to prove good faith and demonstrate that you exercised reasonable care and diligence to prevent such a loss. How absurd is that! Even after you show all that that, it is still at Citibank’s discretion whether to “resolve the liability or not”. Is it any wonder the sensible man loathes banks despite yielding to them? They borrow your money, charge you a higher rate for borrowing back and offer you pittance for its use. But we shall leave this for another day.

Diana Chee rightly did not agree with the absurd reply and sued Citibank for several declarations the main ones being (i) that the BNM Guidelines issued pursuant to sections 25 and 70 the Payment Systems Act 2003 have the force of law and (ii) the term relied upon by Citibank to deduct the sum of RM 1,859.01 was illegal, void and contrary to public policy.

Justice Mohd Apandi Ali who heard the case at the outset opined that Citibank was an operator under the Payment Systems Act 2003 and therefore bound by the BNM Guidelines, which his Lordship very helpfully reproduces in its entirety for our benefit. I would strongly recommend those with credit cards to read and understand it. This would prevent credit card companies from taking advantage of your ignorance and fear of seeking legal advice. Clause 15.2 of the BNM Guidelines was referred to and is worth considering in full:

15. Liability For Lost Or Stolen Credit Card

15.2 The cardholders’ maximum liability for unauthorized transactions as a consequence of a lost or stolen credit card shall be confined to a limit specified by the issuer of the credit cards, which shall not exceed RM 250.00, provided the cardholder has not acted fraudulently or has not failed to inform the issuer of credit card as soon as reasonably practicable after having found that his credit card is lost or stolen.

His Lordship then opined quite rightly, “This ‘one hour prior to reporting of the loss card’ clause, to my mind is not only unreasonable and ridiculous but it is contrary to the provisions of cl. 15.2 of the Bank Negara Guidelines. In fact, the RM 250 is the maximum liability of the cardholder in such circumstances, and that the onus of proving fraud or unreasonable delay to report loss of the card is upon the issuer of the credit card”. So in this case, the Judge ruled that it was Citibank that had to prove any alleged fraud or unreasonable delay on the part of Diana Chee before they can deny her the limitation of liability.

This is my favourite part:

“The cardholder has complied with the said terms of reporting and confirming the loss of the credit card. The respondent cannot have the discretion, despite having it so written in the agreement, to circumvent the Bank Negara guidelines, with a view to limit its liability.”

There you have it. Citibank despite knowing the BNM Guidelines defiantly made terms of agreements for their credit cards that not only infringed the BNM Guidelines but was designed with the purpose of limiting its own liability. This you can appreciate could translate into increased profits for them.

The Judge then rightly goes on to point out that breaching the BNM Guidelines is an offence punishable under section 57 of the Payment Systems Act 2003 which prescribes a fine not exceeding RM 500,000.00. If the credit card company continues to offend it then it will be additionally liable to a fine not exceeding RM 1,000.00 for everyday that the offence continues. His Lordship states that, “the issuer of the credit card is also liable to have its approval revoked by Bank Negara if the issuer has failed to comply with any of the Guidelines issued by Bank Negara”. So clearly, the BNM Guidelines is an offence and if your credit card of bank is in breach of it, you should lodge a complaint with Bank Negara.

But it is not just the credit cards that are ripping us off. An interesting paper written by Kalavathy Maruthavanar titled “Internet Banking — A Boon or A Bane? A Study on the Legal Issues Relating to Internet Banking in Malaysia” (Developments in Malaysian Law: Selected Essays, Sharifah Suhanah Sy. Ahmad, UM 2007) suggests that our local banks are in flagrantly in breach of the BNM guidelines for internet banking as contained in the “Minimum Guidelines on the Provisions of Internet Banking Services by Licensed Banking Institutions” (referred to after this as the BNM Internet Banking Guidelines), which were issued pursuant to section 119 and section 126 of the Banking and Financial Institutions Act 1989 (“BAFIA”), and remains in force by virtue of section 77(4) of the Payment Systems Act 2003.

Kalavathy focuses her attention on four areas but I will focus only on two which I feel relevant here:

The first area is the Standard Form of Contract (“SFC”) between the bank and the user. Here she points out that the SFC generally forces the customer to agree to indemnify the bank for all and any loss arising from using internet banking regardless of whether they are at fault or responsible for the fault. She also points out that banks commonly exclude liability for negligence and for “any technical, hardware or software failure of any kind”. Basically the customer will have to bear the loss no matter what happens even when the bank is responsible.

Kalavathy points out that such clauses are in violation of Part 5, Clause 1.2(iii) of the BNM Internet Banking Guidelines which provides as follows:

“The customer know their rights and liabilities and are fully aware that they are responsible for their own actions. The contractual arrangements for liability arising from unauthorized or fraudulent transactions have been laid out to the customers. The arrangements should provide for sharing of risks between the banking institution and the customers. However, customers should not bear any loss arising from system failures.”

She also points out the relevance of the BNM Guidelines On Consumer Protection On Electronic Fund Transfers where Clause 17(1)(a) and (b) provides that:

A customer shall not be liable for loss -

(a) not attributable to or not contributed by the customer;

(b) caused by the fraudulent or negligent conduct of officers or agents appointed by, the -

(i) financial institution;

(ii) companies and other financial institutions involved in networking arrangements within this country; or

(iii) merchants who are linked to the card system.

So it appears we have local banks clearly in breach of the numerous BNM Guidelines issued.

The second area concerns the privacy aspect of internet banking. The BNM Internet Banking Guidelines approach is laudable. Clause 4.1 stresses that, “Bank Negara Malaysia considers the privacy of consumer personal information to be an important element of public trust and confidence in the Malaysian banking system”. Clause 4.4 places the responsibility of providing privacy protections in the online environment on the banks. They have to stipulate their Privacy Policy Statement on their websites and ensure that it conforms to conditions contained in clause 4.7. — BNM Internet Banking Guidelines at clauses 4.8 — 4.17 requires the banks to set up a Customer Support Service to handle queries and complaints, and oversee all internal controls.

Kalavathy then discovers that notwithstanding those guidelines, many banks Privacy Policy Statement do not comply with them because:

(i) most of those statements permit dissemination of information to the whole bank’s group and related companies;

(ii) some of those sites contain cookies that track your activities on the internet;

(iii) a customer will not be protected if they click on a third party link from the bank’s website;

(iv) information collected for promotions and contests can be used for marketing.

So even if the Privacy Policy Statement meets with the legal requirements, they do not necessarily do so with its spirit.

Both these developments indicate that though there are many good and noble BNM Guidelines out there, it suffers from the usual lack of enforcement. Bank Negara has to realize that it is no use coming up with all these noble Guidelines without backing it up with regular and consistent supervision and enforcement, more so with banks because they are so wealthy and powerful. Bank Negara has to realize that as consumers with little ability to negotiate terms with a bank, so it is all the more important that information is provided to us directly. This way we can point out and take those banks to task when they treat us as connedsumers instead of consumers, or better yet, living and breathing human beings — not just a financial statistic.

This is sensible and logical. That is probably why Bank Negara does not do it. Kalavathy reports, “The BNM Guidelines are issued by Bank Negara solely to domestic banks. These guidelines are not avaiable to the public and it has been questionable if a lay person can enforce any Bank Negara guideline in a court of law”.

As explained above, the position has moved on since then and BNM Guidelines now have the force of law.

The question now is will Bank Negara publicize all those fine and noble sounding guidelines for public education and awareness.

If they do not, that would raise the further question of, why not?

* This article is the personal opinion of the writer or publication. The Malaysian Insider does not endorse the view unless specified.

“Should I Apply for a Credit Card?” If you ask me – The DMP Blogger – this question, it’s for sure that I will discourage you from applying for a credit card.

As a credit card debt woman who is currently under AKPK’s free debt management program (DMP), I will surely advise you to cultivate the habit of using cash, rather than swiping credit cards.

But, I am not your loved one or family member, right? Why would you want to listen to me? So, the decision on whether you should apply for a credit card is up to you.

With credit card ads in television, newspapers, websites, shops and almost anywhere and everywhere asking you to apply for a credit card, it’s difficult to resist the temptation.

Besides, when you look around, most people have credit cards or multiple credit cards. So, why shouldn’t you apply for a credit card?

Furthermore, you have been told that there are endless benefits associated with having a credit card. The most important benefit of a having credit card is none other than the convenience it offers. Instead of carrying a lot of cash on you which is both inconvenient and unsafe, you just need to carry a plastic card with you.

Moreover, you get interest free credit. This means that you don’t have to pay the bills till the next monthly billing cycle. With this benefit, you can buy now and pay later when your salary arrives. What a great reason to apply for a credit card, isn’t it?

In addition to that, you get to enjoy interest-free installment payment plan. You can buy the Samsung LN32B460 32-Inch LCD HDTV or Orient Men’s Multi-Eyes White Automatic Watch you have been longing for today and pay for it in installments on your credit card.

Another good reason to apply for a credit card is the discounts on shopping. Due to the tie-ups between credit card companies and the merchants, you, as a credit card holder, get to enjoy deeper discounts, reward points or even cash back benefits.

See, there are so many benefits of applying for a credit card, aren’t there? So, why shouldn’t you apply for a credit card?

Whether you should or should not apply for a credit card, it’s a matter of personal choice.

Is applying for a credit card now as easy as last time? Well, I am not so sure. Since I started credit card debt reduction in 2007 and AKPK debt management program in October 2008, I haven’t bothered much about credit cards.

However, judging from the credit card ads and offers that are still widely seen on the newspapers, magazines and online, it’s my guess that getting credit cards is still very easy.

These days even if your credit is bad, you can still get a credit card. There are tons of credit card companies out there that are willing to offer credit cards for people with bad credit or credit cards with no credit check.

As a credit card debt woman who is now in a free debt management program, my two cent opinion – Do Not Apply for a Credit Card if You Don’t Have Any.

You know, having a credit card almost always means that you are going to go into debt, be it a little or a lot.

Cautiousness is very important in using your credit card. If you are not sure that you can handle a credit card, then rethink applying.

You need to be sure that when the credit card statement comes in that you can make the payments. If you are not completely sure, then don’t get a credit card until you are ready.

If after analyzing your financial situation, you still think that you can handle a credit card and its payments, make sure that you read the fine print of the banks or credit card companies’ terms and agreements to make sure that there are not going to be any surprises.

Do you know that credit card debt is a major cause of over one million bankruptcies each year? I almost opted for bankruptcy when my credit card debt was out of control due to high interest rates, late payment fees, over-limit fees, cash advance fees, retail interest charges and other miscellaneous fees imposed by banks and creditors.

Had it not been the option of enrolling in a free debt management program, I would have filed for bankruptcy in 2008.

If you are a new credit card holder, you need to keep in mind that the real cause of your financial mess is you. Make sure you don’t put your blame on the credit cards and the credit card companies when your credit card debt is out of control.

One shopping spree does not usually cause high debt. It is usually a pattern that consists of gradually increasing purchases that add up to a large debt.

It’s fortunate that you are at the stage where your credit card debt is still under control. To make sure that you do not get into deep debt trouble is to start spending less than you make.

Spend Less Than You Make. It sounds simple, right? Well, it can be very difficult if you have a problem with willpower. It is important to stick with spending less than you make or you will find yourself in exactly the same place as I was before and had to resort to debt relief help option like debt management plan to get out of debt.

If you can summon enough willpower and strength towards your finances and spending, then you will find yourself the winner in the game of debt without the need of a debt management program.

As someone who has been there and done that, my advice is – If you don’t have the money to spend, then don’t spend it!

I no longer need to worry about credit card offers. The reason is simple – I am in a free debt management program now.

As long as I am still in the program, banks and credit card companies dare not won’t approve any credit cards or loans for me. This is good to me who is easily enticed by loan or credit card offers.

Before enrolling in the debt management plan, I used to have 7 credit cards and a personal loan. From one credit card to 7 credit cards in 2 years’ time, thanks to my weak resistance to credit card offers.

I did try hard not to give in to the temptation the credit cards offered, but material cravings were more powerful than the will of my mind at that time. The moment a credit card issuer approved me a new card, I could hardly wait to use it to pay for items and services I fancied.

If you don’t want to end up signing up with a debt management program like I did, it’s wise to prevent yourself from accepting another new credit card offer to add new debt to your existing amount of debt.

Credit card offers, no matter how enticing and convenient they might seem, may be the most expensive loans made by banks, department stores, and gasoline companies for you.

But how to avoid the temptation of credit card offers?

If you seem to have problems saying “no” to credit card offers, the most effective way to prevent yourself in accepting another credit card is a little bit of truth serum – How Much Credit Card Issuers Get from Every Transaction of Your Credit Cards.

Besides high interest rates, there are also annual fee, late fees, retail interest fees, cash advance fees, over-the-limit fees, and other miscellaneous charges that add to your credit card debt.

I decided to enroll in a debt management plan not because of the total amount of my credit card debt I owed. NO. It’s because I couldn’t bear with the high interest charges, late payment fees, over the limit fees and all sorts of ridiculous charges that added to my credit card debt exponentially.

All the fees and charges made paying down my credit card debt a waste of all my hard-earned money. I was only paying the fees and charges, not the principal amount of my credit card debt!

If you are really a person who cannot say “no” to numerous credit card offers, you must learn to pay bills punctually so the interest rates and charges are as low as possible. It also pays to read monthly statements while keeping the copies of sales receipts so you would compare the charges.

It’s better for you to learn how to deal with credit card offers now when your credit card debt is still under control, isn’t it?

You are lucky if your debt hasn’t landed you on the need of enrolling in a debt management program.

I had to resort to joining a free debt management program after failing to see much decrease in my credit card debt. Month after month I threw in chunks of my hard-earned money into making the minimum payments, yet the total credit card debt didn’t seem to drop much.

Was it because I kept adding new credit card debt to my outstanding balance? Noop. It’s because of late payment fees, over-limit charges, cash advance fees, retail interest charges, and miscellaneous fee charges that kept being added into my total debt.

Scary, right? To avoid letting these horrendous fees imposed by banks and credit card companies drags you into a deep debt hole, you need debt management tips to help you get out of debt fast.

1. Credit Counseling. Seek help from a certified credit counselor who can help you navigate through your debt dilemma.

You can either opt for a non-profit credit counseling agency or a for-profit credit counseling company when it comes to credit counseling. The difference is that the former provides free counseling and charges a nominal monthly fee if you decide to enroll in a debt relief program while the latter charges quite exorbitant fees.

2. Debt Consolidation Loan. You should only consider a debt consolidation loan if you are not able to replace your high interest credit cards with one, low interest rate credit card. This is because you may have to pay for an application fee for a debt consolidation loan, whereas with a credit card you would not.

3. Home Refinancing. Refinancing your mortgage allows you to save hundreds of dollars per month on mortgage payments. With lower mortgage payments, the money saved could be used to pay off your credit card debt.

4. Home Equity Loan. Alternately to home refinancing, you may have enough equity in your home to cash out and pay off your debt. Most importantly, credit card debt is not tax deductible, but a home equity loan is. This means you can reduce your debt as well as reduce your tax obligation by cashing out.

See, you have some viable solutions to help you get out of debt fast without resorting to any debt management program, debt settlement plan or bankruptcy that damages your credit score.

You are paying the credit card minimum payments month after month, but you feel that you are not getting anywhere. Most importantly, you feel that you are just throwing your hard earned money away to the credit card companies.

I understand how you feel now. I was in the same situation with about $13,000 in credit card debt before I enrolled in a free debt management program in my country.

$13,000 is equal to RM45,500 in my country’s currency. It’s a huge credit card debt that my hubby and I no longer could go on paying. High interest rates, late payment fees, over-limit charges, cash advance interest charges, retail interest charges were pumped into our existing credit card debt month after month mercilessly.

Phone calls made to banks and letters faxed to credit card companies asking for lower interest rates were either ignored or granted with a drop of one point or two points from 18% to 17% or 16% that made no difference at all.

Thinking of late payment fees, over-limit charges, cash advance interest charges, retail interest fees and other miscellaneous fee charges just drove me crazy.

If you have been thinking of declaring bankruptcy to get rid of your debt, think twice. There are better financial relief programs that you can consider before resorting to filing for bankruptcy.

I used to think that going bankruptcy would be my only solution to get rid of the credit card debt. Apparently I was wrong.

You know, you can consider credit counseling, debt consolidation or debt management program to help you find financial relief.

Make sure you find the National Foundation for Credit Counseling (NFCC)’s nonprofit affiliate, usually known as Consumer Credit Counseling Services (CCCS) for a debt management program.

Legitimate credit counseling agencies are affiliated with the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

There are simply too many fly-by-night companies that disappear with your money or leave you with more debt that you have to be careful when it comes to choosing a reliable credit counseling and debt management program agency.

Have your bills overwhelmed you and you have no idea what to do? Don’t worry there are two financial aid relief options available to you – debt management programs and debt settlement plans.

Of course, if given a chance, you don’t want to have to resort to either of these financial relief programs in your lifetime.

Debt Management Programs. Debt management is a program where a consumer credit counseling service company combines all of your debts into one big sum and works out a monthly payment that you can afford. You pay this lower monthly repayment until all the debt is gone.

All the major credit card companies will work with a debt management program rather then see you go into a collection agency.

There is one catch though. During the course of your debt management program, you cannot apply for new credit of any kind anywhere.

Debt Settlement Plans. Debt settlement differs from debt management as instead of paying a monthly payment, you pay the whole amount up front.

In order for this program to work you have to have a large amount of money on hand for a one time sum. Inability to meet this requirement will probably end up with you getting calls from a collection agency.

If neither of the debt relief programs is what you want, then just keep your bills paid on time.

The primary difference between a debt management program and a debt settlement plan is whether you credit score will get hurt.

So, will joining a debt management program or debt settlement plan negatively affect your credit score?

Credit card debt management program usually leaves you in better shape with an easier time of restoring your credit while while debt settlement usually leaves your credit in a blasted wreck and takes a while to restore.

As you know that bad things do have a tendency to happen when you are least prepared, just keep in mind you do have these two choices.

If you’re in debt up to your ears then you’re probably trying to do something about it. There are many options but essentially it comes down to debt management programs versus debt settlement plans.

Although neither of the debt relief options is really something you want, it is sometimes necessary to have a better understanding of the two.

Debt Management Programs. Debt management programs essentially do what they say. The credit counseling and debt management agencies take all your bills, compile them into one lump sum, and then you make one monthly payment on that.

Sometimes however certain debt collectors will not want to work with debt management programs because it means they will get less money. Most prefer to work with major debt management groups.

During debt management usually you cannot apply for any credit cards or lines of credit with banks or credit card companies. This will last until the debt repayment program has been completed.

Debt Settlement Plans. Debt settlement is where the debt settlement companies take your money every month, but don’t make monthly payments to your creditors. Instead, they put it in a trust account, negotiate your debts with your creditors and then make a lump-sum payment when there’s enough in your account to pay a creditor in full.

Take note that debt settlement companies do not ask your creditors to stop all interest charges, late fees and over limit fees from accruing. This means while the negotiations with your creditors are ongoing, your bills will continue to grow!

If it’s so unfortunate that you’re sued and a judgment is brought against you, you’ll owe more money than before!

The process of a debt settlement can also damage your credit depending on the size of the debt. If you cannot make it usually you are turned over to a collection agency, or your goods are repossessed.

The one major difference between debt management programs and debt settlement plans is your credit. If you go with a debt management plan, your credit in most cases will be wiped clean and you can start rebuilding it. If you use a debt settlement plan however your credit will be badly damaged and you’ll have to start picking up the pieces and superglue them back together.

You usually won’t consider either of them unless you’re in financial trouble. Which, if that’s the case then you’re going to be paying attention to the differences between them. Just remember management equals monthly payment, settlement equals one big lump sum.

If neither of the debt relief options is really something you want to end up doing, then you should always try to keep your debts paid down to avoid having to resort to either a debt management program or a debt settlement plan.