Debt settlement scams

Debt settlement companies should be avoided for several reasons.

First, they have high fees, often 25% to 35% of the debt amount. Even worse, these fees are often charged upfront before any settlements are reached. You deposit money every month into their “program,” but none of those payments go toward settlement. Rather, they go in the debt settlement company’s pocket as fees, leaving little to nothing for settlement with creditors.

Second, they often make false promises. Many make unrealistic promises to reduce your debt quickly or for “pennies on the dollar.” If it sounds too good to be true, it usually is. They simply cannot deliver on promises like this, especially since many creditors refuse to negotiate at all with debt settlement companies. This leads to certain debts not being resolved whatsoever. Moreover, every account in your portfolio continues to accrue substantial interest, penalties, and late fees, which makes settlement unlikely and impossible for “pennies on the dollar.”

Third, if you get sued, the debt settlement company does absolutely nothing for you. If (most likely when) you get sued by your creditor, the debt settlement company will tell you to hire your own lawyer leaving you high and dry when you most need help. The most they do is simply take that account out of your “program,” but that does nothing to resolve the lawsuit. These debt settlement companies are not attorneys and cannot address a lawsuit.

Lastly, many are unlicensed. While debt settlement is allowed in Pennsylvania, it is a highly regulated industry and hardly any of the companies doing business in this Commonwealth have been licensed to perform those services. The debt settlement companies try to skirt the laws here by sending an “agent” to your home to sign their 20+ page contract face to face. The so-called “agent” is merely a notary who is not an employee of the debt settlement company, but just a hired shill they use so they can get you to sign the documents in person.

Once you realize you have been had and demand your money back, it’s often too late, as that company is often no longer in business, or if they still are, they point to the fine print claiming that no refunds are provided. Don’t be yet another victim.

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