How To Find A Trustworthy Debt Relief Company
There are a lot of debt relief companies promising to help people get out of debt via debt settlement - negotiating with creditors to reduce the amount of debt that you have to repay.
While debt relief companies can help you with negotiating settlements and arranging a payment plan, you need to be careful when deciding which debt relief service to trust with your financial future.
Unfortunately, there are some unscrupulous companies in the debt relief industry that make big promises and fail to deliver - or who even scam their customers out of money. The Better Business Bureau received over 3,500 complaints between 2007-2010 about debt settlement companies that were accused of using unfair or dishonest business practices.
Fortunately, there also are trustworthy debt relief companies that will help you get real solutions to the financial challenges you are facing.
Here are a few questions to ask in order to evaluate the claims and promises that debt relief services are making, and decide which ones to trust.
Is the debt relief company asking you to pay upfront fees?
This is one of the most common debt relief scams - disreputable debt relief operations will charge hundreds, or thousands of dollars, in fees to trusting customers who need help, only to leave the customers owing more money than ever. A reputable debt relief company will never ask you to pay fees until they have helped you negotiate a payment plan with your creditors. A good, legitimate debt relief company earns its money as a percentage of what you save on repaying your debts.
One way to find a trustworthy debt relief company is to work with a company that is certified by a professional industry organization, such as the American Fair Credit Council (AFCC). Debt settlement companies that are AFCC members do not charge any upfront fees and agree to a strict Code of Conduct.
Does the debt relief company make promises that sound too good to be true?
If a debt relief company tells you they can settle your debt for "pennies on the dollar," or that they can "remove bad information from your credit report," this is a sign of a debt relief scam. The truth, according to the Federal Trade Commission, is that there is no guarantee that any creditor will accept less than full payment of a debt that you owe. And it is not possible for any debt relief service to "fix" your credit score by removing negative information from your credit report. If you have made late payments or failed to repay a debt, there are consequences for your credit score that cannot be removed.
Debt relief companies cannot guarantee you a certain percentage of savings because every person's situation is different - so be wary of any debt relief company that promises you a huge percentage of debt relief. Ultimately, while debt settlement services can help negotiate on your behalf and help manage your payments to creditors, not all creditors will always agree to accept less money than they are owed.
Has anyone made a consumer complaint against this debt relief company?
Before you sign up with a debt relief service, check with your state Attorney General to see if any consumer complaints have been registered about the debt relief company. Or you can start by doing a Google search for the name of the company, plus the word "complaints." Find out if the debt relief company is involved in any government regulatory actions or lawsuits for deceptive or unfair practices.
Does the debt relief company tell you about the risks?
Debt relief can help people pay off their debts and save money compared to the total amount that they owe - but there are risks to debt relief and debt settlement plans as well. A trustworthy debt relief company will not just tell you the positive aspects of debt relief, they'll also advise you about the risks and possible downsides as well. According to the FTC, debt relief companies are required to give customers a number of disclosures about the costs and possible risks of signing up for a debt settlement service, including:
- Price and terms. The debt relief company must tell you exactly how much money it charges in fees and what are the conditions/limitations and expectations of its debt settlement services. You should know what you are going to pay and what level of service to expect.
- Timeframe for results. Debt relief takes time, because the debt settlement company has to negotiate with various creditors and make payments on your behalf using money that you've saved over time in a dedicated savings account. The debt relief company is required to tell you how long you can expect to wait before they are able to make a settlement offer to each of your creditors, based on your overall debt settlement plan. They must also tell you how much money or what percentage of debt you must save before they can make a debt settlement offer.
- Consequences for non-payment: Many debt settlement companies ask you to stop making debt payments. Often, this is part of the strategy of your debt settlement program, because some creditors require an account to be delinquent before they will consider making a debt settlement. However, there can be consequences for your credit rating, so you might continue to receive collection calls, and you might even be vulnerable to a lawsuit for failing to pay your loans.
Signing up for a debt settlement program with a debt relief company can help you improve your financial situation in the long run, but there might be short-term or medium-term consequences and risks. A trustworthy debt relief company will talk with you openly and honestly about the risks as well as the benefits.
There are other options to resolving your debt problems, such as consumer credit counseling, debt consolidation, or, as a last resort, declaring bankruptcy. Every possible solution has benefits and risks, and you need to evaluate your options and do your research to find out which path is right for you.
For example, although debt relief companies require you to save money each month toward paying off debt settlements, and there are risks involved with stopping payments to your creditors, there are also risks involved with continuing to struggle to pay your bills, or with declaring bankruptcy. Working with a trustworthy debt relief company can help you move forward to a more financially secure future.