BBB Issues Warning About Debt Settlement Companies

The debt settlement industry has been in the media quite a bit in recent years. Rising in popularity as a result of the recession, the number of companies offering debt settlement programs has grown exponentially. With more and more people waging a daily battle to pay down debt with little to no available resources, many companies have taken advantage of an already desperate situation.

The Better Business Bureau as well as the Government Accountability Office have recently issued another warning about companies operating in this industry. An April 29th warning listed on the Better Business Bureau website is the most recent in a string of warnings issued to consumers regarding debt settlement companies. You have undoubtedly heard or seen advertisements for these companies which promise to reduce your debt by 50% or more and you may have asked yourself how this process works.

The actual process of debt settlement is not necessarily in question, instead the companies that offer these services without fully disclosing how the process can affect the consumer enrolled in the program. Debt settlement itself has been practiced for years, however in the past two years, more and more companies are sprouting up to take advantage of consumers in desperate situations. This has resulted in consumer complaints filed with the Better Business Bureau from citizens in all 50 states. It is important for anyone considering this process of debt elimination to be aware of concerns regarding the industry in order to make an informed decision.

The BBB offered the following warning signs to avoid working with a debt settlement company that uses questionable practices.

• Charge high upfront fees- If you are considering working with a debt settlement company that charges all or most of their fees upfront, proceed with caution. The company may be more interested in getting paid for their “services” before actually providing them. While every company wants to get paid for the work they perform, understand that the longer it takes you pay the debt settlement company fees, the longer it will be before you can save money for your settlements.

• Unrealistic promises- Do not allow your desire to get out from under a boatload of debt to cloud your judgment when dealing with a debt settlement company. If the promises made seem to good to be true, they most likely are. Anyone who promises guaranteed results for a process that offers no such guarantees is not being forthright.

• The process is not fully explained- There are several risks involved with the process of debt settlement. Each situation is different and each lender reserves the right to continue collection efforts for the full amount of monies owed. For those who are able to successfully reduce the amount of debt they are responsible for repaying, tax and credit issues still remain. A legitimate debt settlement company will go over all of these concerns before enrolling you in their program.

These tips offered by the BBB serve as a reminder that consumers should take the time to carefully examine all available debt relief options before moving forward with third party help to eliminate debt. There are legitimate companies within the industry that can help qualified consumers reduce their debt, however understanding the process and what signs warn of a company that is not operating on the up-and-up will help you make the right decision regarding your financial situation.