Debt settlement companies make big promises they often don’t keep

As a debt relief agency and bankruptcy law firm, we often encounter clients who have previously tried settlement programs. While some programs are legitimate, the industry is filled with predatory practices and some outright scams. The initial pitch is very enticing – the debt settlement companies promise to save you thousands of dollars by utilizing their “special” skills to negotiate lower settlements.

These big promises are rarely kept and even the FTC warns about scams. It appears to work at first because after a client signs up and gives up account access, the debt settlement company gets contact information changed. This means the person may stop receiving phone calls and billing statements and mistakenly believe that the program is working. Meanwhile, their account is being auto-drafted for hundreds of dollars each month for the program. Months down the line, a lawsuit or garnishment is filed and the borrower contacts their debt settlement program about what went wrong. Only then do they realize that most of their monthly payment went towards fees of the debt settlement company and not towards negotiated payoffs. The person then cancels the program and may end up filing for bankruptcy anyway.

Before you sign up with a debt settlement company, you should insist on having a personal consultation with a licensed attorney. The representatives who contact you are often non-attorneys and will try to avoid this, which should be a big red flag. Make sure they detail exactly how much you will pay for fees and costs of the program. It is also smart to research and check for reviews or complaints online against the company.