Debt Settlement Warning Signs

If a debt settlement company takes part in any of these activities, they are not legitimate:

• Advance Fees- Do not pay before you receive the service!  The FTC has banned advanced fees in debt settlement mainly due to the small amount of successful credit reductions and the failure to follow through with promises (even still the debt settlement companies will keep the fees).  Also, up-front fees reduce the ability of the client to continue paying creditors and saving money during the program.


• Stop paying debtors- Stopping payments has a very negative effect on consumers’ credit scores.  It is also banned by the FTC to tell consumers to stop paying their creditors.  Debt settlement companies also claim that once the credit card debt settlement is signed, the debtors will stop calling.  This is not true!


• Exaggerating Success Rates- When debt settlement companies claim an 85% or higher success rate, there is reason to be suspicious.  According to The Association of Settlement Companies, the real number of successful consolidations by debt settlement companies is between 34 and 60 percent.


• Guaranteed Debt Reductions- If a credit card debt settlement company guarantees a debt reduction, they are lying.  There is no guarantee that any debt settlement will occur.


• Fraudulent and Deceptive Representations- There are dozens of claims that debt settlement companies make that are not true.  One of the major themes is connecting debt settlement to government programs.  It is important to do your homework before contacting a company for their services rather than impulse buying debt settlement services. 

   The Government Accountability Office (GAO) went undercover and posed as ficticous consumers. Watch this video providing real life examples of debt settlement companies defrauding consumers.

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