As consumers are still working towards eliminating their heavy debts, many are still turning to third-party companies for relief and assistance in managing their debts. Debt settlement companies can be an asset to those who find it difficult to negotiate and pay off the debts they still owe creditors. Debt settlement companies work on behalf of the debtor to handle debt negotiations and payments and while many do legitimately achieve the elimination goals of the consumer, there are still companies setting up shop only to make a quick buck.
Federal Monitoring Increases to Protect Consumers
The Federal Trade Commission has stepped up its game to monitor these fraudulent companies to ensure that consumers are not being scammed. Typically what occurs with a scam company is the debtor pays an upfront fee for debt help only to later find nothing was done and the agency made off with their cash. As many debtors become desperate for help and are overwhelmed with debt, they fail to first investigate the company they sign with for debt assistance.
But it is that investigative process that the FTC recommends to all consumers to prevent scams and con artists from taking advantage of a desperate consumer. Regulations have been increased but there are still those agencies that slip through the cracks or find loopholes to solicit customers.
Performing the Necessary Due Diligence
The FTC recommends all consumers check into the debt settlement companies they plan to use before signing any paperwork. Start by checking the ratings and reviews with the Better Business Bureau in your area. Ask friends or relatives for referrals to companies who have provided services successfully.
You should also contact the companies directly and ask pertinent questions. Getting an upfront feel for the customer service provided can help you make a decision as to which company best meets your needs. Avoid accepting help from a company that actively solicits customers through telemarketing. Since you can never be certain who is on the other end of the phone unless you’ve initiated the call, never give out personal or financial information over the phone.
The biggest red flag for debt settlement companies who are not looking to provide help and only want your money is the request for an upfront fee before any services are rendered. Never pay for services that have not been completed and always ask for a written explanation of all fees and the total cost of the program before you enroll. It is also important to understand what services are provided to be sure they are legitimate methods for effectively settling debts. Many non-reputable companies will use big promotions to lure in customer’s cash, using the promises of services that are not even possible, including ‘settling debts for pennies on the dollar’. While many debts can be negotiated to a lower amount, it is highly unlikely a creditor will be willing to forgive much of the entire debt. Creditors are often willing to agree to a debt settlement in the interest of getting some repayment back but most will require a reasonable amount to be paid in order to clear the debt.
Success Is Possible
Debt settlement is often a useful tool for those in debt to clear the slate but it pays to find a company that is both reputable and experienced at the settlement process. Fees among service providers do vary but reasonable expense can be justified when debt elimination had been successful. For consumers living on a tight budget, it is essential to avoid the possibility of being scammed. Once the money has been paid, it is rare for consumers to get it back and that sum of cash would be better spent toward debt repayment.
The Federal Trade Commission plans to continue their aggressive monitoring of scam companies and consumers are encouraged to report suspected scams involving debt settlement companies to their local Attorney General’s office. The more knowledgeable a consumer is about debt settlement rules, the less likely they will be the victim of a scam.