Debt Settlement USA Launches Consumer Debt Index

Debt Settlement USA, a leading debt settlement company, today launched The Consumer Debt Index, a new quarterly statistical analysis that measures the degree to which American consumers are suffering under an increasing burden of credit card, car payment, mortgage, and other debt.

In the first quarter of 2008, the Consumer Debt Index (CDI) stood at 11.76 – up an astounding 22 percent over the second quarter of 2007 when it was 9.60. The CDI is calculated based on a combination of the Consumer Price Index, consumer credit outstandings, mortgage delinquency rate, and unsecured consumer loan delinquency rate.

Since the second quarter of 2007, each CDI component has increased, and in some cases dramatically. For example, the mortgage delinquency rate soared by 67.7 percent and the consumer loan delinquency rate increased by 18.6 percent. The level of outstanding consumer debt rose 4 percent and the Consumer Price Index grew from 2.08 to 2.12, or about 2 percent.

Importantly for consumers, the increase in the CDI has continually softened since the second quarter of 2007. It increased only 2.7 percent in the first quarter of 2008, after increasing an average of nine percent each quarter since the second quarter of 2007.

“The Consumer Debt Index reflects an alarming trend for consumers who are trying to get out of debt. Clearly, people are increasingly unable to pay their credit card bills and mortgages,” Jack Craven, President of Debt Settlement USA, said. “It’s encouraging, however, that the CDI is showing signs of leveling off. It will be interesting to see if next quarter’s CDI shows that this softening is a continuing trend.

While the Consumer Price Index has risen steadily since the second quarter of 2007 due to skyrocketing gas and food prices, the increase in mortgage and consumer loan delinquency rates has been less severe each quarter. The mortgage delinquency rate rose only 11 percent in the first quarter of 2008, after rising between 20 and 25 percent in the third and fourth quarters of 2007. The consumer loan delinquency rate actually decreased during the first quarter of 2008, after rising approximately 10 percent each quarter since the second quarter of 2007.

As a result of this analysis, Debt Settlement USA expects to see a 40 percent increase in the number of consumers in 2008 who see debt settlement as the best solution to help them deal with financial hardship in a weakening economy. 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.

“In this economy it’s no surprise that so many people are facing a difficult time, and for many of them, it’s their first experience with this level of fear and uncertainty,” Craven said. “The trends we see in the CDI make it clear that financial hardship is becoming a reality for an increasing number of Americans. It is more critical than ever for solutions such as debt settlement to be available to help people avoid bankruptcy, get out of debt, and back on track financially.”

With the number of consumers facing financial difficulty expected to grow in the coming months due to the weakening economy, Debt Settlement USA emphasizes the critical need to establish standards within the debt settlement industry now in order 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 a debt settlement agreement. A legitimate debt settlement company should meet the following guidelines:

Ø   Have written policies and procedures.

Ø   Be a member of the Better Business Bureau.

Ø   Have comprehensive “Debt Settlement Company Certification” documentation similar to what creditors may require for their collection agencies and other vendors.

Ø   Have an open door policy as to regulatory agencies and vendor certification for creditors.

Ø   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 unsecured 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. Unsecured consumer loan delinquency rates include credit cards as well as other personal consumer loans.  

Debt Settlement USA, Inc. is the leading debt settlement company in the United States, offering an honorable and ethical alternative to bankruptcy. Located in Phoenix, Arizona, the company currently serves 15,000 clients, and has settled over $100 million in balances since inception in 2003. On average, Debt Settlement USA settles clients’ debts for 45 – 55 percent of the outstanding balances that are brought into the program within a period of one to three years.