Are you looking for a legitimate debt settlement company? There are a lot of debt settlement companies that advertise their services online. A quick Google search will give you page after page of potential debt settlement companies with which to work.
Why is there such a demand for debt settlement companies? The answer is simple. There are a lot of people battling with major debt issues. Experian, one of the top three major credit bureaus, reports that the average debt per consumer is $29,093, up 2 percent from 2014 figures. As Americans slide deeper into debt, cash-strapped consumers turn to debt settlement as a way to get out of financial hot water.
But not all debt settlement companies are legitimate. Fly-by-night debt settlement companies can spring up in a hurry. And some of these so-called debt settlement companies are nothing but scams. They prey on consumers in dire straits and cause them to end up with an even worse financial situation than they originally had.
What can you do to protect yourself from such predatory companies? This guide is designed to give you the tools you need to find a reputable debt settlement company and reduce your debt burden the right way.
How can you spot and avoid a bad debt settlement company?
Perhaps the easiest way to spot a bad debt settlement company is by evaluating what they promise to do for you. As a general rule, if a debt settlement company promises something that sounds too good to be true, it probably is. You should avoid debt settlement companies that promise to settle your debt for “pennies on the dollar.”
The simple truth is that there are no quick fixes to debt problems. A reputable debt settlement company will negotiate with your creditors and craft a well-planned strategy to get you out of debt. This process can take anything from a few months to four or five years. It all depends how long you take to save money for the settlement. If you are promised an instant fix to your financial issues, it is probably a scam.
The Federal Trade Commission offers a few more red flags to look for when choosing a debt settlement company. Avoid any debt settlement company that:
- Charges you fees upfront before settling your debts.
- Pressures you to make “voluntary contributions.”
- Talks about a “new government program” that helps you eliminate credit card debt.
- Guarantees that it can make all your unsecured debt go away.
- Tells you not to communicate with your creditors, without explaining the serious consequences.
- Tells you that you are guaranteed not to receive further collections calls.
- Requires you to provide personal financial information before explaining the types of service it offers.
- Demands payment before your creditors have agreed to settle your debts.
If your debt settlement company offers you legal advice, that is also a bad sign. As a general rule, debt settlement companies do not offer legal advice because they are not attorneys.
What do you need to look for in a debt settlement company?
What, then, are some things to look for to let you know you are dealing with a reputable debt settlement company? Here are some general guidelines that every legitimate debt settlement company should follow.
- The company should fully disclose all fees and costs before signing you up for a debt settlement program. There should be no surprises when it comes to fees.
- The company should provide you with written policies about their debt settlement solutions.
- The company should provide you with estimates of how much a settlement might be without making a guarantee.
- You should also get an estimate of how long the company will take to make an offer to your creditors.
- There should also be clear communication about how much you will need to save before the company will make an offer to your creditors.
- The company should send every resolution offer to you for review before presenting it to your creditors.
What you should get out of a debt settlement?
An agent of the debt settlement company should be able to help you understand your options. Also, the agent should be completely upfront and realistic with you about what to expect. On this point, it is a good idea to follow your instinct. If you do not feel confident and comfortable with the representative with whom you are talking, it may be best for you to look elsewhere.
Talking with family or friends who have gone through a debt settlement program may be helpful as well. Getting a referral from someone you know and trust who can vouch for a company’s customer service is a good idea.
A reputable debt settlement company will provide you with a copy of their standard service agreement before they request any personal financial information from you. They will also thoroughly explain both the pros and cons of a debt settlement program to help you make an informed decision about what is right for you. And, they should be able to back up any claims they make about their service with written evidence.
A reputable debt settlement company will likely also have a physical, verifiable address, not just a website address. This is important since many debt settlement scams originate and live solely online.
What type of accreditation will a reputable debt settlement company have?
A reputable debt settlement company will most likely be accredited by or affiliated with recognized industry groups.
The American Fair Credit Council (AFCC) is the leading industry trade group for the debt settlement industry. To receive AFCC accreditation, members must go through a rigorous on-site audit every year. Members must follow FTC rules and regulations. Companies must also follow the AFCC code of conduct. If your debt settlement company is an accredited AFCC member, that is a good sign that the company is reputable.
Your debt settlement company may also be part of the IAPDA. This association requires its members to be certified debt consultants who understand and can communicate the pros and cons of debt settlement to their clients.
The National Foundation for Credit Counseling (NFCC) is the largest financial counseling organization in the U.S. Its accredited member agencies must have annual operations audits. They must comply with all consumer disclosure regulations. They must also be licensed, bonded, and insured.
What kinds of questions should you ask a debt settlement company?
When talking with an agent of a debt settlement company, there are a number of questions that you will want answered to your satisfaction. Here are some questions that will help you weed out scam artists and find a reputable company:
- Are you a member of AFCC?
- With what other professional organizations are you affiliated?
- Are you licensed, bonded, and insured in my state?
- How long have you been in the debt settlement business?
- Is debt settlement your main business, or is it a sideline to another business endeavor?
- How much debt have you settled for clients?
- With which credit card companies have you had success in negotiating debt?
- Do you charge any fees upfront? Remember that the answer to this question should always be “no.”
- Can you stop all my creditors from calling me? Once again, this answer should be “no” if the company is being honest with you.
- Can you guarantee that you can settle all my unsecured debt? “No” is the honest answer.
What is the price of hiring a reputable debt settlement company?
The price debt settlement companies charge varies according to the circumstances. According to the Code of Conduct for all fully accredited AFCC members, fees charged for services must be fair and reasonable. This is another great reason to work with a debt settlement company that is a fully accredited AFCC member.
Some debt settlement companies will charge you a flat fee for their services. Typically though, debt settlement companies base their fees on a percentage of the debt you need settled. Or, they may base their fee on a percentage of the amount saved through settlement.
If possible, find a debt settlement company that bases their fee on a percentage of the amount saved through settlement. This provides your debt settlement company with more incentive to save you as much money as possible.
There are a number of debt settlement companies from which you can choose. Knowing the right questions to ask and the right signs to look for makes it easier to make an informed decision about which company is best for your needs. If you are ready to start your journey toward becoming debt-free, get a free debt settlement consultation today.