Beware Debt Settlement Scams
September 15, 2008
They masquerade under various names such as debt consolidation, debt management, debt relief, debt elimination and debt settlement. They are the companies that promise to solve all your debt problems.
You’ve probably seen them in the newspapers and on late-night television.
Beware and be careful.
Debt settlement is an option to help you eliminate your debt. Debt settlement is a method of debt reduction in which the debtor and creditor agree on a smaller balance that is considered payment in full.
Debt settlement companies act as an intermediary between the debtor and creditor. They negotiate a price for settling the debt and take payments from the consumer. A debt settlement company’s primary incentive to settling your debt is to make money. If you choose the wrong company, you could be a victim of a debt settlement scam.
Here are a few things to be aware of when choosing a debt settlement company.
Does the debt settlement company tell you what the fees will be up-front? What are the fees based on? If the fees are based on a percentage of the debt- be careful. Some companies will charge large up-front fees and large monthly fees that are due before they actually do any negotiation with creditors.
Is the debt settlement company registered with The Association of Settlement Companies (TASC) or the Better Business Bureau? How long has the company been in business? How much debt have they actually settled? If they have been in business for a few years, their debt settlement ratio should be higher.
Are the employees paid a commission? This might not be a great idea from the consumer’s viewpoint.
Will the debt settlement company get the collection calls to stop by using the provisions of the Fair Debt Collection Practices Act? If they answer this with a no, consider your options.
Will the debt settlement company make a guarantee?
Is the person you are working with a lawyer in good standing in your jurisdiction? If so, check with the state’s ethics and licensing entities to ensure that the person has not fallen on the wrong side of regulators in the past.
There are many things to consider when considering debt settlement. Be careful and be aware. If you have questions or doubts, you can consult a professional for recommendations.
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