Thought this was good to share. You’ve probably heard ads on the radio and maybe even received telemarketing calls offering debt settlement services. The idea sounds appealing: Pay a company a fee to settle your debts with your creditors for you. You pay one payment, to one company, and the rest is in their hands. Simple and easy… right?
Wrong. Here’s how debt settlement companies REALLY work:
STEP 1: They sucker a consumer into signing up for their services.
STEP 2: They charge a huge fee for their “service” which they conveniently break up into monthly payments.
STEP 3: They tell you to stop paying your creditors so that you can afford their ridiculous fee. So instead of paying money directly to your creditors you’ll pay a large payment to the debt settlement company every month.
As much as 70% of that payment may go to their fees, with the remainder (hopefully) being placed into an escrow account (for which you also pay fees).
STEP 4: They do nothing. That’s right… NOTHING. The debt settlement company will sit and take your money for as long as 2 years without contacting one creditor on your behalf or taking any action whatsoever to start the debt settlement process.
STEP 5: Usually by this time, the consumer has either ran out of money or dropped out of the program. Maybe they got sued by a creditor and had to put money towards their defense.
If they are lucky, they’ll at least get their escrow money back, but in many cases it seems the debt settlement company will simply pocket it and disappear.
As you may have guessed, that’s a huge problem.
Wish this was wrong, but unfortunately it seems the track records of debt settlement companies are generally horrible, with the vast majority of consumers who enter “debt settlement” programs not ever finishing them. And to think, you could have contacted your creditors and settled your own debt from the beginning!
