One unfortunate development of today’s volatile economy is that dishonest debt settlement companies now have a larger target market of consumers with debt issues. These companies market their services with only one thing in mind – to swindle consumers out of their hard-earned money.
This topic is so important for today’s consumers that Inc. magazine included debt settlement companies in its recent article titled, 7 Businesses to Watch Out For. Far too often consumers fall prey to dishonest debt settlement companies who over promise that they can erase all past debt and tax problems when in actuality they are more likely to make your debt problems worse.
“(Some companies) offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees.” said FTC Chairman Jon Leibowitz. “Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”
This is extremely relevant to online consumers who use the Internet to locate settlement services and may be more easily reeled in by unscrupulous debt settlement companies rather than the legitimate ones that offer more realistic results.
7 Essential Criteria for Spotting Bad Debt Settlement Companies
To avoid deceptive business practices employed by unsavory companies, consumers must be able to differentiate between reputable debt settlement companies and unscrupulous ones. The following is a list of seven essential criteria to use to spot a bad debt company:
- The company representative never asks about your debt problems. It should be common sense that debt settlement companies would ask consumers these types of questions in an initial consultation. This is typically discussed in order to determine whether there is an actual problem or not prior to issuing any type of resolution with credit companies.
- Do not allow a representative to push you into signing an initial agreement on the first consultation. They are paid to obtain initial offers, but if they work for a legitimate debt settlement company they won’t try to push you to do something that can harm you financially.
- Unscrupulous debt settlement companies over promise results. Unfortunately, this is the hook that typically catches the eye of the consumer in the first place. If a person has serious debt problems, they are looking for the golden egg to rid themselves of these issues.
- Top debt settlement companies know the FTC closely monitors this area and will not promise any type of results or make any claims prior to meeting with a client. There are no guarantees in the debt settlement process and companies should not offer them up front.
- The company promises a quick resolution. The debt settlement process is a long and slow one, and there is no way to foresee how long your particular case will take. As mentioned above, the unscrupulous companies love to promise the impossible, including a quick resolution with ideal results. This should always be a red flag, especially considering that every person’s debt situation is different.
- Ask your representative how he or she can promise such results if any are given. Make sure they can validate their promises, and then obtain them in writing.
- The company routinely assigns you a new representative. If you are dealing with a company already and seem to be assigned a new account representative every other time you call, this should be a red flag. Reputable debt settlement companies have well-educated and knowledgeable staff members who are often employed by the same company for a long time. They also understand that having the same representative helping you through the process will likely garner better results.
- Obtain the full name and contact information for each representative you deal with, and inquire about his or her availability if you get handed off to someone new.
- The company requires you to make an advance deposit for the same amount you currently have in your bank account. On October 27, 2010, the FTC banned debt settlement companies from collecting advance fees. Companies cannot collect any money from clients until the debt relief service has successfully renegotiated or settled, or otherwise settles one of the client’s outstanding debts; there is a plan between the client and a creditor; and the client has made at least one payment to the creditor as a result of the plan.
- To safeguard your position, ask your debt settlement company representative to provide you with an estimate of how much your settlement will cost and base your initial payment to them on that amount.
- Their office does not exist. Conduct a simple Google search of your settlement company’s address to determine whether it actually exists as a physical business location, or if it is a PO Box or virtual office set up at the local UPS store.
- If they do have a physical address, use Google Maps with Street View if it is available to see exactly what the business and its surrounding area look like.
- You can never get your representative on the phone. If you have already signed with a debt settlement company but always get voicemail when you call your representative, this should serve as a warning sign. They are working for you and should be available to you within a reasonable amount of time when you contact them. Communication is a clear sign of how professional a company is, especially one that is dealing with something as important as your financial health.
- Obtain the names and contact information for both another representative and a manager to contact in the event you are unable to make contact with your assigned representative.
Consumers should also make sure to understand all the new regulations the FTC recently imposed on debt settlement companies. Unscrupulous companies quickly found loopholes in the debt settlement regulations and began modifying their business practices to work around adhering to the law.
Find the Best Debt Settlement Companies through Caution and Due Diligence
When it comes to your money and debt issues, make sure you proceed with caution and conduct your due diligence to confirm you are dealing with a reputable debt settlement company and not an unscrupulous one. By using the above steps you not only will decrease your chances of being taken in by a dishonest debt settlement company, you also will increase your chances of finding a plan that will put you in a better financial position.
If you’re having trouble paying your credit card bills and other unsecured debt find out how debt settlement can help you avoid bankruptcy and become debt free faster.