Debt Settlement USA's Rising Consumer Debt

[newsroom]

Debt Settlement USA's Rising Consumer Debt Index Fueled by Skyrocketing Mortgage and Consumer Loan Delinquency Rates
PHOENIX -- Debt Settlement USA, a leading debt settlement company, today reported that the Consumer Debt Index (CDI) for the third quarter of this year stood at 13.55, up more than 6.5 percent since the end of the second quarter and nearly 30 percent since the third quarter last year (see graph).

The CDI is a statistical analysis developed by Debt Settlement USA to measure key economic factors that are most severely impacting Americans who face an increasing burden of credit card, car payment, mortgage, and other consumer debt. The Index is comprised of the Consumer Price Index (CPI), consumer credit outstandings, the mortgage delinquency rate, and the consumer loan delinquency rate.

The economic crisis continues to make it difficult for consumers to pay their debts. According to the American Bankruptcy Institute, nationwide consumer bankruptcy filings were up by 40 percent in October since a year ago.

The CDI's third quarter increase was largely driven by the mortgage delinquency rate, which is up an astounding 15.7 percent over the past quarter, and nearly 87 percent in the past year. Additionally, the rate of consumer loans more than thirty days past due was up nearly 3.1 percent in the third quarter and increased by more than 16 percent since a year ago. The third quarter also saw a tightening of the consumer credit market, as consumer credit outstandings only grew by $8.1 billion, or about a third of a percent since the second quarter of this year.

"As the upheaval in the American economy continues, more and more Americans are becoming desperate to find a solution to help them get out of debt. They are increasingly turning to alternative methods such as debt settlement," said Jack Craven, president of Debt Settlement USA. "The current economic crisis and America's addiction to credit has created a perfect storm in which consumer credit delinquencies will be the next crisis to hit the economy."

Debt Settlement USA expects to see a 40 percent increase in 2008 in the number of consumers that turn to debt settlement. Legitimate debt settlement companies can help people avoid bankruptcy and get out of debt efficiently and expeditiously by negotiating a settlement for a portion of the debt with their creditors.

Debt Settlement USA emphasizes the critical need to establish standards within the debt settlement industry to protect consumers from fraudulent and unethical debt settlement practices. According to Debt Settlement USA, consumers and creditors should review the practices of debt settlement companies prior to entering an agreement. A legitimate debt settlement company should meet the following guidelines:

-- Have written policies and procedures.
-- Be a member of the Better Business Bureau.
-- Have comprehensive "Debt Settlement Company Certification" documentation similar to what creditors may require for their collection agencies and other vendors.
-- Have an open door policy as to regulatory agencies and vendor certification for creditors.
-- Have an in-house attorney with significant credit industry compliance experience and a customer dispute resolution review process.


About the Consumer Debt Index Methodology

The CDI is calculated each quarter by adding the quarterly average of the U.S. Department of Commerce's monthly Consumer Price Index, the Federal Reserve's quarterly average of consumer credit outstandings, and the Federal Reserve's quarterly mortgage delinquency and consumer loan delinquency rates. Consumer credit outstandings reflected in the CDI include revolving and non-revolving short or medium term credit to individuals, excluding loans secured by real estate. The mortgage delinquency rate reflected in the CDI is based on real estate loans including loans secured by one to four family properties, including home equity lines of credit. Consumer loan delinquency rates include credit cards as well as other personal consumer loans.