Do you debt settlement companies? They’re companies that work with lenders to get their customers’ debts settled for less than their balances. In fact, in some cases a good debt settlement company can get your debts pared by as much as 40% or 50%.
Unfortunately, some debt settlement companies are scam artists. The Federal Trade Commission (FTC) has rules and regulations for what debt settlement companies can and cannot do. The problem is that some of them fail to adhere to these regulations. For instance, some will try to get people to pay them up front, despite the fact that this is forbidden by the FTC.
Would you be a good candidate for debt settlement?
The first thing you need to determine is whether you’d be a good prospect for debt settlement. The criteria for this are pretty simple. You need to owe a minimum of $10,000, though the more you owe, the more a settlement company can save you. You also need to be at least five months behind on your bills. Of course, this varies with each debt settlement company. If you owed $10,000, and were only four months behind, there are settlement companies that would still take you on as a client.
How to spot a dishonest debt settlement company
We’ve already mentioned the first sign of a dishonest debt settlement company, which is if it asks you to pay anything up front. Some bad debt settlement companies have collected thousands of dollars from their customers up front and then never settled any of their debts.
A second sure sign is if the company contacts you, as reputable debt settlement companies simply don’t do this. Dishonest debt settlement companies try to get around FTC regulations by contacting prospects via Skype, text messages or in-person meetings. This is because they believe – wrongly – that these techniques get them out from under FTC and U.S. telemarketing rules. Some of these scam artists will hire attorneys, as lawyers are exempt from FTC rules, or they pretend to be law firms.
How to identify a reputable debt settlement company
In addition to what you have read above, there are other ways to know that you’re dealing with a reputable debt settlement company.
The first sign is if the company belongs to the Better Business Bureau and has, at the minimum, an A rating. A second good sign is if you can find reviews of it on the Internet, where the vast majority are positive.
Third, the company should be a member of the National Foundation of Credit Counseling or the Association of Independent Consumer Credit Counseling agencies. Companies that are reputable want to maintain their reputations, and will make sure they’re a member of one of these agencies. If you find the company is registered with one of the two, be sure to check to see if there has been any feedback on it.
Reputable debt settlement companies are upfront about their fees. Most charge a percentage of the amount of debt being settled. This generally varies from 15% to 25%. But despite this, they can still save you money. Suppose, for example, you owe $18,000 and the settlement company charges a 20% fee or $3600. If it’s able to settle those debts for 40% ($7200, you’d still be $3600 ahead.
An honest debt settlement company will settle all your debts before collecting its fee. What it will do is add a percentage of its fee onto each of your monthly payments, but not actually collect the money until it has settled all your debts. This amounts to is a 100% satisfaction guarantee, because if you were to become dissatisfied with your program, at any time and for any reason, you could simply cancel and it wouldn’t have cost you a penny.
Good debt settlement companies are never pushy or aggressive, nor do they promise quick fixes. How long it will take one of these companies to settle your debts will depend, of course, on how much you owe, but it will likely take from 24 to 48 months.
Finally, reputable debt settlement companies operate transparently. They keep their clients up-to-date as to the progress they’re making in settling their debts, and are also available to answer any questions you might have regarding your program.
Debt settlement can be a good option depending on how much you owe. However, as you have read, it’s important to choose a reputable firm because if you were to choose a dishonest one, you could lose thousands of dollars and still be stuck with all your debts.