There’s another breed of debt relief companies you may encounter as you’re trying to figure out what to do about your debt – debt negotiation companies. Unlike debt settlement firms, debt negotiation companies don’t promise to help you pay off your debts completely. Instead, these companies typically say they can help you get a lower interest rate or monthly payment on your credit cards by negotiating with your credit card company. Of course, they charge a fee for this service.
Some debt negotiation companies have called consumers on the Do Not Call list. These debt negotiators may say they’re from “Card Services” or something similar making it seem like they’re affiliated with your credit card issuer, when they’re actually not.
Drawbacks to Using Debt Negotiation Companies
Many consumers have had several problems with debt negotiation companies. The debt negotiator may reduce the cardholder’s interest rate by negotiating an accelerated payment plan that requires higher monthly payments, payments the cardholder may not be able to afford. Or, the debt negotiation company, after collecting a fee, comes back to the cardholder saying the creditor did not agree to a reduced interest rate. The company would then refuse to refund consumer’s money because they’ve technically kept up their end of the deal – to offer a lower interest rate to the creditor.
Like some other debt relief related companies, debt negotiators typically don’t provide any service that you can’t do on your own. You’re perfectly capable of calling your credit card issuer and asking for a lower interest rate. Chances are if you can’t get a lower interest rate, a debt negotiation company can’t get one for you.
Protect Yourself From Scams
Beware of calls from debt relief companies that you did not initiate. Sure, you may be having trouble with your debt, but a company that contacts you unprompted is trying to sign you up for something. Before you agree to any service, make sure you understand what’s being provided.
Recently amended federal laws for certain debt relief companies do not allow for-profit debt negotiators who make telemarketing calls to ask you to pay upfront for their services. Instead, such companies can only ask you to pay them when they’ve provided the result they promised. They also have to give you details about their service including how the service works, what results you can expect, how long it takes to get those results, how much their services cost and anything negative that could come from using their service.
Getting all the details on a debt negotiation service can help you understand exactly what you’re signing up for. Some companies call themselves one name, but the services they provide may actually fall under another category. For example, a debt negotiation company who gets your creditors to accept a settlement payment on your account is better known as a debt settlement firm. Or, a debt negotiation company who sets you up on a debt management plan or also known as a DMP with your creditors is better known as a credit counseling agency.
Before you sign up with any debt relief company, it’s a good idea to check their background with the Better Business Bureau. If they don’t have a BBB listing, just Google the company’s name or even their phone number to see what other customers have said about their services.