Thanks to the recent amended federal law on debt settlement companies, the number of debt settlement scams has probably been reduced. The amended law makes it illegal for most for-profit debt settlement firms to charge upfront fees. Unfortunately, some companies may find ways to get around the law which means you should still do your homework when it comes to choosing a debt settlement company.
How Much Do You Have to Pay Upfront?
Even non-profit debt settlement agencies may charge upfront fees for taking on your debt settlement case. But this fee should be minimal, possibly around $100 or less and you shouldn’t have to pay a fee until you’ve decided to sign up for the service. In addition, you should not have to pay a fee for settlement services until after the company has successfully negotiated a settlement for you. This is essentially the law for those for-profit companies subject to the Telemarketing Sales Rule so non-profit settlement companies hopefully should follow the same rule of thumb.
Assessment of Your Situation
A reputable debt settlement company will probably spend time understanding your finances and your debt before enrolling you in a debt settlement program. After all, debt settlement may not be right for you. Bankruptcy could be a better solution or you may qualify for consumer credit counseling. You should avoid any debt settlement company who pushes you into signing up for a settlement program before they’ve taken time to decide whether that’s right for you.
Length of Time in Business
The longer the debt settlement company has been in business, the more experience they possibly have in helping consumers settle their debts. Companies that have only been around a few months or a couple of years probably haven’t done very many settlements because their customers haven’t had enough time to save up settlement funds. You should ask the company how long they’ve been in service. But don’t always take their word for it. Check around on the internet to confirm the company has actually existed for as long as they say.
Feedback From Previous Customers
One way to find more information about a settlement firm is to see what other people are saying about their services. Check with the Better Business Bureau, BBB.org, to see what kind of complaints there are against the settlement company you’re considering. Several unresolved complaints could be a clear sign to walk away.
Another way to obtain feedback about a company is to look them up on a search engine. Often previous customers have discussed companies on message boards and blog posts. You might find these comments by searching for that company’s name and looking through the results you find. The mere existence of complaints doesn’t necessarily mean a company is bad because even good companies can be complained about. However, what previous customers are saying is probably the key to figuring out if they’ve done good business or not.
You could also check with your state Attorney General’s office to find out if customers have complained about a specific debt settlement company.