Posts Tagged ‘debt settlement’

Debt Settlement Scams

In Uncategorized on July 7, 2010 at 1:10 pm

Have you considered using a debt settlement company to deal with your debts? Be careful. The New York Times reported settlement companies typically have fees of 15 to 20 percent of credit card balances. Even worse, they tend to collect fees upfront, regardless of whether a customer’s debt is actually reduced.

Since 2004, 21 states have broght 128 enforement actions against debt relief agencies. Consumer complaints received by states attorney generals more than doubled between 2007 and 2009.

In the typical case, customers make monthly deposits into special accounts while skipping credit card payments. Once the money in the account reaches a sufficient size, the settlement company negotiates a lump sum payment with the creditor.

What they don’t tell you is that once you stop making payments, the creditor get angry. Collection calls and lawsuits quickly follow. After getting a law suit, one customer called her settlement company, Financial Freedom. She was told, “we don’t have any control over that, and you don’t have enough money in your account for us to settle with them.” Her account held only $1,470 even though she paid $3,700 into it. The rest went to the settlement company as fees.