Debt settlement companies: consumers beware

April 6, 2009 by Todd Murray · 3 Comments 

30556169_906ac1bfdeThey go by many different names: debt settlement companies, credit counseling agencies, debt negotiators, etc. Many consumers turn to them when their bills started piling up. They pay the company several thousand dollars as an up-front fee. The company promises to get them out of debt through a “secret program” that the credit card company doesn’t want them to know about.  

But what the debt settlement companies don’t tell consumers is that there really are no secret programs to get out of debt. I know this because I used to collect debts for some of the largest credit card companies in the world. And even though the credit counseling agency promises to settle your debt for pennies on the dollar, remember that it takes two parties to settle a debt, the consumer and the creditor. And creditors rarely settle debts for pennies on the dollar. So now the consumer is in the same position as they were before hiring the debt settlement company, only their wallet is noticeably lighter.

Consumers would be wise to avoid for-profit debt settlement companies. Many are outright scams that will pocket your money and then disappear.  And even the legitimate ones can’t do anything that you can’t do yourself for free. But if the thought of negotiating with your creditors makes you nervous, there are many non-profit programs that do fabulous work for no fee.

(photo: cowicide)

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About Todd Murray
I'm a consumer rights lawyer in Minneapolis, Minnesota. I sue debt collectors that harass and abuse people, defend debt collection lawsuits, and sue repossession companies that wrongfully repossess cars and trucks.


3 Responses to “Debt settlement companies: consumers beware”


    Check out what others are saying about this post...
    1. [...] Yesterday I wrote about the dubious value of for-profit debt settlement companies in the context of credit card and other unsecured consumer debt. Today’s New York Times has an article about congressional efforts to fight back against similar companies that prey on desperate homeowners facing foreclosure. [...]

    2. [...] written in the past advising consumers not to use  for-profit debt settlement companies to resolve their debts. The [...]

    3. [...] written several articles cautioning consumers about for-profit debt settlement organizations. This legislation has [...]

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