Ed Portelli, a Debt and Credit Specialist in Canada, explains how to overcome the burden of dealing with credit card or other non-secured debt.
The seminar address the issues of dealing with debt when it is out of your control.
Attendees learned from this Teleseminar
- How to overcome the burden of dealing with credit card or other non-secured debt
- What the process is for dealing with credit card companies and other creditors
- What to watch out for if you try to negotiate with institutions on their own
- How they can get their financial life back on track.
Hosted by: Dan Couvrette, CEO, Divorce Magazine
Guest speaker: Debt/Credit Specialist – Ed Portelli. Ed Potelli is the owner of OCCA – Consumer Debt Relief. OCCA is an independent firm offering confidential debt management and repayment plans to Canadians. Learn more at www.occa.ca.
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Read the Transcript of this Podcast Below.
Ed Portelli Gives a Financial Advice on How to Deal with Debt
Intro: Hi, my name is Dan Couvrette. I’m the publisher and CEO of Divorce Magazine, at divorcemagazine.com and Family Lawyer Magazine at familylawyermagazine.com. Every month we invite professionals to talk with us about issues and information that can help divorcing people and professionals serving the divorce market. Those podcasts can be found on divorcemagazine.com and on familylawyermagazine.com. Today I’m very pleased to have Ed Portelli from the Canadian firm of OCCA – Consumer Debt Relief with me on this podcast. Ed is an expert in the area of debt and finance and I’m very pleased to have him.
He’s going to share information that will be of interest to both people who are either going through divorce or have recently divorced. He’s going to share information for those who have financial debt issues, as well as professionals who are serving the divorce market – whether that be family lawyers, mediators, or other financial professionals as well, who may lack the advice and information that they can give to clients about how to deal with that. So, thank you very much for joining me on our podcast today
Ed Portelli: Thank you, I’m glad to be here.
Great. So can give me a little bit of background about the type of work that you’re doing, perhaps what inspired you to get involved in this type of work?
Ed: Well, we help people get out of debt. I mean, it’s it sounds like a simple strategy, but everyone is in debt for different reasons. Myself and my wife who started this company 10 years ago, were in the collection agency industry for a long time. We got to see what happens with people, why they’re there, what they could have done differently, that sort of thing. When we started our own business, it was with the goal that people come into debt for different reasons and we’re not here to judge those reasons. Life is life. Things just happen.
What we’ve done is said, “Listen, we know what would be the smartest answer if we were in debt. We know the system. We know how it works. We have moral values. We have all these different things.” So, we based it on helping friends of ours and relatives, and that sort of thing. We decided to go public with what we know and start helping people help protect themselves.
We found that that the only remedies out there were ones that were still institutional based. They were still systematic, where the creditors had no problem with it. They agreed with it or they supported it, or they paid for it. We wanted to truly represent an individual and not just try to mediate, or try to enhance the agenda of the creditors, and get as much as possible from a person. We took their situation and started from scratch, filled out their budget, found any additional income that they may have had (any additional money to pay towards these creditors) and we took that amount of money and used that and that alone, to offer repayment back to creditors.
So when you’re talking about debt, are you only talking about credit card debt? Are you talking about any other type of debt that you might be able to help people get a better handle on?
Ed: Well, it can include their entire situation. There are certain roadblocks to that. If you have a secure debt of any sort, then there is no real way for us to get in between the creditor and the asset.
For the listeners, I think people probably know, but a secured debt would be something like a mortgage.
Ed: Yeah, it is like a mortgage or a car loan, anything that you borrow that is directly related to an asset, where if you stop paying, you risk losing that asset.
Now what we do is we take all of the unsecured debt – the credit cards, loans, gym memberships – anything that is unsecured, and we can negotiate with the creditor with some strength. In a lot of cases, people have lost their vehicle or have lost their home. Now the residual that they owe, the additional money they have to pay, is no longer secured. The security has been compromised or taken, so we can now include that as well.
But our goal is to try to take care of things like mortgage first, and food of course, and all the necessities – and then anything secured. In the case where there’s divorce lawyers involved, we would want to make sure they get taken care of, because people need their assistance. To us, we consider that a secured debt because it’s a service you don’t want to lose. So that’s what we mainly focus on.
There are certain avenues, certain things that we can’t specifically deal with directly (like a student loan, or taxes) but we can and we do help people walk through the process to get that negotiated (either down if it’s possible, or to get them to lower payment arrangements that they can afford). We will still hold their hand, because that’s what people need. They’re not aware and it’s very difficult to understand the process of every creditor that you have. So instead of trying to figure all this out, we know exactly where everything stands. We’re upfront and say, “Look, this is very difficult to deal with. There’s nothing we can do here, but we can fix our arranged payments or protect you in all these other areas that allow you to take care of that.”
If you’ve just joined this podcast, I’m talking with Ed Portelli from the firm OCCA – Consumer Debt Relief, that’s a Canadian firm. The information that Ed is sharing with us today is particularly for Canada. If you’re a person listening from the US, you’ll want to check to see if you can find a company like Ed’s. And by the way, you can go to Ed’s website, it’s OCCA.ca. That’s OCCA.ca not “.com” – and you’ll get an idea of Ed, his service, and what he does to help people.
If you’re in the US, you will have to find a company similar to Ed’s, but the information he’s going to share with us today will be of use if you’re negotiating or wanting to negotiate some of the debt that you might have. Also, this will be useful for family lawyers (like Ed had mentioned) that of course are wanting to get paid by their clients. If a client has financial problems, of course lawyers will have a concern about getting paid. So, we’re going to talk a little bit more about that.
Again, given that both family lawyers and divorce and people are listening to this podcast, can you give some advice to family lawyers about what they should tell their clients who are faced with financial challenges? Maybe it’s the same advice that you would give to the divorcing person themselves, but what would that advice be? What would the steps be that you recommend they take? And maybe in that answer, you may also want to point out what is the difference in approach between what your firm does at OCCA and how other credit repair firms approach the challenge of the situation?
Ed: Firstly, from the family lawyers that we’ve spoken with, we found that there’s a lot of misunderstanding or a lack of information as far as what to do when an individual is in crisis financially. From what we understand, there is a lot of mental counseling. There is the sorting out (as in how to divvy up assets) or how to protect an individual in their case. But what we do, is we take the money (the debt owed) and we take that off their hands – and we will actually handle their financial situation as far as debts go. We will look at it on an approach that starts (as I said earlier from the beginning) and sees what their new financial position look will look like and what they can truly afford. We found a lot of people jump the gun too quickly and pay off creditors, sell houses, and use that money, and they’re not using it wisely – because a lot of times, the money is not enough to clear them outright.
So clients start to pick and choose what they should pay down and what they should pay off – maybe it’s the one that that they feel is the most pressing or the one they have received the most calls about. So, we eliminate all of the personal and emotional feeling from the negotiation with the creditors. We look at their situation clearly. We look at what the new situation is going to be like (sort out what they can afford) and then we will protect them and defend them while we’re negotiating with the creditors, so that nobody is squeezed beyond their means.
When you’re already going through a tough situation, the last thing you are capable of handling, from what we see, is the specifics of: “What’s the smartest way to go? What’s the best thing to deal with? Who can you negotiate with better than who?” In a lot of cases, individuals are trying to clear these things up or the lawyers are trying to help them clear these things up, one debt at a time. Or again, the one that’s causing the most flak.
We will take your debt from the beginning and start with you as if your business is now downsized. Let’s say that you are an individual, but you’re also a business – you have financial obligations and you have things to take care of. We want to make sure that you have an entire plan that makes sense before you put out another penny. In a lot of cases, there’s disputes. There’s co-signing (as far as there’s two individuals on a debt), there’s one on some of them – so we want to sort out whose is whose, and what you’re responsible for. In a lot of cases, we have both divorcing individuals come here and they have separate accounts. We make sure that the finances are taken care of. It doesn’t hurt the other individual anyway, because we are not dumping the problem on someone else. We are simply taking your position, your situation, and helping sort it out for you.
So, let’s say I owe $10,000 to Visa and I owe $10,000 to MasterCard, and there’s no way that I can pay these off (going through divorce is a financial challenge, I’ve just run out of money and the interest rate is somewhere between 18-22%) – if I just pick up the phone and I call Visa and say: “Gee, sorry, guys, I can’t pay you” – what are they going to tell me?
Ed: Well, I’ve heard some stories. I’ve yet to really verify any, and I didn’t want to say that there are none, but you can always negotiate with your creditor. The unfortunate part is that 99% of the time, that negotiation has to be done when you’re still in a position of strength, you still have a good potential to pay, and you’re looking for maybe a minor adjustment.
With most credit cards, most people that carry a balance are paying the minimum already. Even if they reduce the interest, the minimum payment – the amount that’s built around budgets these days – if you look at your visa statement carefully, it’s actually now legislated that they have to tell you how long it will take to pay. In most cases, you’re looking at 40-100+ years.
That’s a long time.
Yes, but up until now, it’s been the same. It’s just that now they have to illuminate that by putting it on your bill. But I look at my own bills (we all have bills; I look at them) and it took me a couple months for it to actually register that it’s coming up on my bill. It’s kind of innocuous, it’s just sitting there in the same font as everything else, and at the same time, because you really can’t do much more, it really has no significance to people.
People look and they see how ridiculous the length of time it’s going to take, but their budget has mostly squeezed them in a position where all they’re doing is making minimum payments anyway. In my understanding, all it really does is gives people their first real opportunity to review their situation and see how they’re doing. Up until then, it seems like there always has to be a critical point or a crisis – a car repair, loss of work, divorce – something to tell you to actually look at your credit card statement and review your financial situation.
What we do is we say “Listen, you’re not going to be able to pay this back as is it’s not going to make any sense. You’re going to have to ask for lower and you’re going to have to lengthen the term, which already doesn’t get you anywhere.” So those sorts of things we don’t recommend, but when people get divorced, we consider it like you have started a new company. We review what your new company is capable of and how quickly you can get out of this. If you cannot get out of it quickly, then we’re going to need to negotiate to get you out. There is no advantage to paying every last cent that you have indefinitely. Our goal is to speed things up, to force the issue with creditors and say “They’re either going to pay you what they can afford or there is no advantage to them paying you anymore, because this is going to go on forever.”
I can understand why they would be better off using a company like yours, rather than trying to negotiate with each individual creditor, because I assume that your company is going to give the creditor the plan. You’re going to say “This person owes this, this, this and this, and here’s our plan” and because you’ve got 10 years of credible experience, the creditor will be more likely to go along with the proposed plan – would that be an accurate statement?
Ed: That’s accurate, but at the same time, to be honest, we’re not as interested in that. I mean, we are interested in starting with “What can they truly afford? What is in their best interest?”
From there, the creditor can choose to accept that if they like. They can choose to flex their muscle if they like, they can choose to be oppressive in some way if they like – that has no bearing on our company at all. We’re not worried, we’re not upset, we’re not sad and we don’t feel guilty. We’re just simply saying, “Look, we are here to reconstruct their business, which is them as an individual and their life and this is what they have to offer. If you choose to accept it, that’s terrific. If you don’t, then you have two choices. You can either walk away (in which case, in a place like Ontario, after two years, the debt becomes statute barred.) What the statute says is, after two years of non-payment, the file cannot be brought in front of a judge any longer. We use that, because we force them to realize there’s nothing better here. We’re not going to make them borrow any more money. We’re not going to make them take food off their table just to pay these things right now. We’re going to do everything we can to protect themselves. If you don’t want to answer me, then in two years, the debt is no longer a legitimate debt you can chase in court. It doesn’t mean the person still doesn’t owe the money, but for the sake of argument, it means there’s nothing that can happen to them anymore.”
We found that we have to push these creditors into those situations, because otherwise, they provide the minimum that they require, regardless of the person’s situation. In most cases, they can’t afford it. When you talk about non-profit credit counseling for example, they need creditor approval or the deal is off. We don’t need creditor approval. If they give us the approval to take the deal, that’s great. If they don’t, that doesn’t mean we don’t help you anymore.
In the case of a firm that tries to reduce the amount of payments you make or the interest, that’s what they’re looking at. They’re looking at a fix that can help you a little bit, get you a little bit further, but really has no actual plan on how to get you out of the whole thing.
Secondarily, if you are on credit counseling on a payment plan and your situation changes and becomes worse (and you can’t make those payments anymore) all the interest is reapplied and the two years starts all over again. You are kicked off the program. For us, we are more realistic and we will offer deals based on the situation, even if the deal gets approved. If their situation changes down the road, we will negotiate a new arrangement again. We say “All bets are off, we’re starting again.”
If somebody has five different creditors, you don’t have a pecking order as to who’s going to get paid first or second? You have a plan and you operate out to the five different creditors? Is that how it works?
Ed: As a matter of fact, it’s close. The truth of the matter is, it is not a formal consumer proposal. What we do is labeled an “informal proposal” which means if we choose to, we will offer it fairly and prorated to all creditors, which is our initial attempt. But if some don’t want to deal with it (and some do), we have the flexibility to decide that we are no longer going to offer anymore. If they don’t want that, then we’re not doing that. If there is one that wants to pursue it harder, we can focus more attention on there. So, you’re not stuck with either everyone agrees or you don’t get the deal.
In a lot of cases, people these days don’t have enough money to make a “reasonable” offer anyway. Reasonable and realistic are not the same thing anymore. If your reality is that you have $3 a month that you can pay back, then that is the offer we make. We also limit the time to three years. Now, this is just a typical answer though. If there’s room to move and a little bit more flexibility on our part (and it works for the individual), then we’ll stray off our policy to make sure that everybody has a fair shot. We’re not blanketing everybody with one strategy. However, if it comes to the point where it’s no longer worth your time or it’s not worth paying this back if it goes on forever, we basically call it “laying the creditor off”. We have to lay you off. We can’t, there’s just no other way.
If you use that as an example, if we had an employee and we paid them $20 an hour, our new financial situation is that I can only pay you $2 an hour. Now, is that reasonable? It’s not reasonable. But is it realistic? Yes, it is, if that’s what their reality is. So, I can afford to pay you if you accept $2 an hour – if not, you have two choices. You can walk away or you can attempt to bring in the Labor Board and some legal action. Now, we will defend against that.
Now, if in the very, very rare case (and we haven’t hit any of these cases yet), but if for some reason this person wants to continue spending their money attacking us and wasting their money trying to get through us – and you are forced to pay that 20 bucks an hour – then your company’s going to fold. This means you’re going to go bankrupt anyway. In either case, it’s sad. But it’s a strength and weakness, saying “Look, this is the reality. Nobody is asking you for what’s reasonable, we’re only offering you what’s real.”
The only way to make it better beyond that, means they have to do things that are no good for them. They’re going to have to borrow from someone or they’re going to have to borrow for a longer term, or they’re going to have to sell things that they need. They’re going to have to cut back on food. In this society, we don’t agree that this is fair. That was not the agreement to begin with. The agreement was: All things being equal, will you pay this? Yes, we will, and we’ve done that, but now unfortunately, all things are not equal anymore.
Ed: Things aren’t equal anymore but they have remedies. When somebody is in trouble, they will raise your rate. So that on its own tells you that there is no actual personal vested interest in each individual one of their customers – it’s a process. Our process simply stands by you as an individual. We have to remember, people these days people don’t recognize this. This is a civil dispute. This is not you against the system. It’s not you against the government. It is one entity against another entity.
Now we have gone further than that to identify (and we have proven in several cases) that you never should have loaned him this money, because you knew there was no reasonable expectation to get paid back in full. In most people’s cases, a creditor’s goal is to get people to pay interest for as long as they can. If we identify that their situation previously and currently is such that you should have known they couldn’t pay this back, then we can have that thrown out – and we have.
So, they’re irresponsibly loaning money to people who likely can’t afford to pay it back?
Ed: That’s right. It’s in the law and it’s called an unconscionable transaction. They have as much responsibility lending the money as you do, paying it. We are a company who has fought vigorously. We have defended people from payday loans. We have fought that in court several times, where the individual companies have brought it all the way to trial. We’ve proven (prior to the new rule changing) that their contracts were actually criminal and that the individual didn’t even have to pay the principal back, based on the law. The judge could not force them to pay it because it was a criminal contract. That’s the angle that we take.
We focus on using the law to your advantage. For some reason, that tends to leave a bad leave a bad taste for people, even in the courts. People have a problem with an individual being vigorously defended – they feel like it’s just an instinctive feeling that this person is trying to screw the system.
Ed: We’re of the mind that you’re incapable of screwing the system. We’re not that strong. We’re not that big. We’re not that powerful. Why can’t we use the system and the laws that are in place, to help protect the person? So that’s what we do.
Ed, is everybody at the OCCA Consumer Debt Relief as passionate as you are about defending people and helping people? If our listeners don’t feel passion from you, then they’re asleep and unconscious. You’re passionate about what you do and how you can help people.
Ed: I hope so. I believe so. I believe they are.
Yeah, that’s great.
Ed: I mean, we have a lot of meetings. We are a business, so we do try to operate as a business. As the days go on, our sole concern (that will keep our customers and keep us in business) is to make sure that we truly believe this. I spend at least one meeting a month with all of the employees, reinvigorating them on our position, because it can get very draining. Every creditor, including the courts in a lot of cases – everybody seems to have a problem with vigorously defending a person. They feel like it’s their fault in some way.
It’s like we’re trying to help you quit smoking, but everyone agreed: you signed a contract that you’ll take 10 cartons of cigarettes a month. People are saying “Well, they agreed. They’re the ones who said they’ll do it.” Like, okay, they’ve done it – congratulations. You’ve sold them a lot of cigarettes. You forced them into a position – but their lung is black. They’re dying now, they can’t go on like that.
It seems like we’re one of the few places that actually cares that way. We’re trying to work around and through the system as opposed to working along with it, because if we worked along with it, we’d have to average out our responses. We’d have to say “Look, 70% is the best we can do for anybody.” We’ve had creditors call us and say “If you have an individual that signs up with you, we’ll give you no interest and 70% right off the bat” and I’ve said “That’s amazing, unless they can’t afford it.” And of course, the answer that comes back is “Well, that’s not how an agreement works.” So, I’m left saying “Well then, I can’t have anything to do with that agreement, because everyone as an individual, and if he can offer you 1%, unfortunately, that’s what we’re going to offer you.”
So far, the worst-case scenario that we’ve seen (if someone wants to go all the way through to trial), we end up making an arrangement for payments for the balance, and in most cases, there’s no interest anyway. That is the worst we’ve encountered. So, we’re doing it right. We are doing it against all odds and popular belief, as far as I’m concerned.
It’s amazing how people only really care when it’s their situation. Other than that, our culture is to kind of feel like there’s blame on the other guy: “Their marriage fell apart because of this. He owes money because he must be doing this. He smokes because he’s this sort of fool.” It takes a while for people to realize “So are you!” We’re all the same. We all are in those spots. We’ve got to stop resenting everyone else for being in trouble and recognize that the system is a very tough thing to deal with and so is life. So, when you get down – we are going to help pick you up, and that’s it. We’re not apologizing for that.
My guest today on our podcast is Ed Portelli from OCCA Consumer Debt Relief. Ed’s shared a lot of information about how his firm can help you. So, if you are a person who has debt and you don’t know how to handle it, I recommend that you go to Ed’s website, it’s OCCA.ca. That’s OCCA.ca not “.com” You will get a bit of information there and talk to one of the people who works at OCCA. They’ll tell you how they can help you. Then, you can move on from there and hopefully get a new beginning for your life. That’s what Ed and his firm are hoping to create for you.
Ed: I know we’re cutting our time close here, but can I share one thing that I believe divorcing people seem to be confused about? It’s just one separate note from what I was talking about.
No problem. Go ahead.
Ed: When you decide with your lawyer and your ex-spouse who takes care of what debt, if you are legally bound and responsible for that debt, it doesn’t make a difference to the creditor or to the courts, who is responsible or who you make responsible.
For example, if my wife and I divorce and we agree that there’s certain debts in both names and we put it in writing, saying “My wife handled this debt, so I handle this debt.” If the person defaults on that debt, you are both still fully, separately, and jointly responsible for the debt. Just because you made an agreement with each other, it has no bearing on the courts.
Now what will happen is, the individual that is now supposedly “not responsible” – can be sued. They can come after you for that. Now, you have the piece of paper that allows you to go back after your spouse, because you have an agreement that they should have taken care of it. But in a lot of cases, we found that mental step is missed, where people think that “Once we’ve split, I don’t owe that money anymore. Now they do” – and that is not the case. I want to be very aware of that more than anything. Just because you split it, that is your own personal agreement that has nothing to do with the creditor or the courts.
However, it does give you a chain of events, where if you end up getting sued for it, you can in-turn, sue your spouse. So, it does leave a path where you could follow, but it is not the answer on its own.
Yeah, I think that may be true both in Canada and the US.
Ed: That may be the case. I’m pretty sure it would be the same, but again, there’s so much that’s different in The States. I wouldn’t want to just express that to people without knowing. But the fact of the matter is, if you follow the logic: If I loan you money, you can’t decide to pass that off to someone else and then I have to agree. Yes, if you make an agreement to pass it off, that’s fine. But I still come after you, you can go after them.
A lot of people come here saying, “I thought my ex-wife would take care of this, and they’re not. So I don’t owe it.” That’s not the case. That’s why they’re calling you, because you can’t just have a private agreement that exempts you from a contract in that manner. Now, we help with those and we can sort it out – but you can’t rest back comfortably knowing “Once we’ve split these debts, that person is going to take care of it and I’m off the hook” – because they’re not.
I encourage people to check out Ed’s firm’s website at OCCA.ca. I also invite you to listen to our other podcasts that you’ll find on divorcemagazine.com and on familylawyermagazine.com. Our goal is to help you through this process and Ed was generous enough to share his time, to let you know how his firm can help you through the financial challenges if you’re over your head in debt. If you’re going through a divorce, it’s definitely compounded, so please seek help. I encourage you to check Ed’s website and to contact his firm. Thank you again, Ed. And thank you listeners for tuning into our podcast.
Ed: Thanks for having me.