Some Debt Settlement Companies Fail Consumers Who Want to Become Debt Free
Buyer beware and risky business are two slogans that come to mind now as more reports come out concerning more debt settlement companies failing consumers who sign up with them in their quest to become debt free. Struggling and debt ridden consumers sometimes turn to these debt settlement companies who offer to settle the consumers’ debts for far less than what the consumer owes and less than the original debt amount, for example, on a credit card.
It turns out that most of these companies charge up front fees (numbers often range between 10-15%), monthly fees (the Wall Street Journal writes these charges can be, for example, $50/monthly), and sometimes even a percentage on the back end too based on how much a consumer “saves” in not having to pay the credit card company. If all that wasn’t enough, the real problem is that the consumer can suffer just as much, if not more so, in the end, if they wind up using a debt settlement company that fails to get the job that is promised done. So, for instance, you might consider that they have failed you if they only get part of the job done or not done at all, in terms of how many debt accounts they succeed in settling for you for a lower amount.
Apparently, that is happening all too often and consumers are the ones that end up paying and paying, yet making no progress, or falling even further behind. Consumers are told to stop paying their creditors and eventually the settlement company will work with their creditors. One problem is, first they get their money and up front fees, then you are requested to build up monies in an escrow account that they’ll eventually use towards paying the debt with some creditors - but meanwhile, you still either get harrassed by the collectors or while you’re falling further and further behind, with mounting fees and increasing interest rates, with a sinking FICO score, and more bad marks against you in your credit file, more credit card companies or those who buy their bad debts, are taking the consumers to court, sometimes winning their cases and consumers end up with their salaries being garnished as well. Sometimes consumers also just drop out after a while of paying fees and when they see all of this happening, only to be out more money in the end paying for services that may have never gotten to the point of even getting realized. Here’s a more in depth article you might want to read about this…
http://online.wsj.com/article/SB122394458494631223.html?mod=googlenews_wsj
You’ll see that some of these companies are being pursued by state attorney general offices and that it can be difficult to figure out which debt settlement company may be more legitimate and helpful to your needs.
If you’re thinking of signing up with a debt settlement company, you might consider doing at least these three things as part of your due diligence and research before you make your final decision:
1) Type in the company’s name within quotes into the google or yahoo or other search engine to see what comes up and looking for any listings/websites/postings that refer to the company, it’s practices and consumer experiences;
2) Contact the Better Business Bureau to check on the company, any complaints and if problems were resolved
3) Check with your state’s Attorney General office to see if they are investigating complaints against the company you are considering using or what else they can tell you about the company
Liz Hekimian-Williams
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