6 Steps for Vetting a Debt Settlement Company
If you’re carrying such a large amount of debt that it seems like you’ll never be able to pay it off, signing up for a debt settlement program with a debt relief company may seem like a reasonable solution. That’s because debt settlement companies work to settle customers’ debts by trying to negotiate a reduced amount or better terms, so when all is said and done, you may not have to pay the full amount.
However, debt settlement programs aren’t free. Debt settlement and debt relief companies charge a fee – typically based on a percentage of the amount the company saved you on the settled debt – for their services. There are many reputable debt settlement companies out there that might be able to help you get out of debt sooner.
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But not all debt relief companies are on the up-and-up. The debt relief industry attracts disreputable companies out to prey on the desperation of consumers struggling with debt. So how can you make sure you sign up with a reputable debt settlement company?
Keep reading for six ways to research and gauge a debt settlement company’s reputation.
1. Check with the Better Business Bureau
One of the first steps to investigating a debt settlement company’s legitimacy and reputation is performing an online search for the company’s name at the Better Business Bureau (BBB). If the company is in the BBB database, there you will find its BBB rating, whether its achieved BBB accreditation for fair and honest practices, and customer reviews and complaints.
At the BBB, you’ll also find information on the debt settlement company’s response – or lack of response – to customer complaints and questions and how long the company has been in business.
2. Contact the State Attorney General
Always check for complaints with the State Attorney General’s office in the state where the debt relief company is registered before signing up with any debt settlement company. You may learn there have been no complaints – or you could find a number of consumer complaints that prompt you to run in the other direction.
If you’re unsure of who your state’s Attorney General is, get started by searching USA.Gov for contact information.
3. Know state licensing requirements
Perform an online search for state licensing requirements for the debt settlement company to verify proper licensure. At the same time, keep in mind that not all states require debt settlement companies to be licensed. For example, Montana doesn’t require licensing, but debt settlement companies must register with the Office of Consumer Protection.
If you find in your search that a debt settlement company you’re considering doesn’t meet state licensing or registration requirements, keep looking for one that does.
Find out: 7 debt settlement myths debunked
4. Keep away from robocallers
Here’s how to vet debt settlement robocallers who promise to settle all your debts for an upfront fee: Don’t call them back. There’s a good chance the caller or company is a scammer. If you’re serious about exploring whether debt settlement is right for you, stick with reputable debt relief companies with no or few consumer complaints on file.
Find out: 7 signs of a debt settlement scam
5. Get all information upfront
Before you sign up for any services from a debt settlement company, it must provide all legally required information upfront, such as fees, conditions and terms of service, according to the Federal Trade Commission (FTC). The company must also inform you of any possible negative consequences, such as harm to your credit history if you stop making payments to creditors as part of the debt settlement arrangement and how long it may take to achieve desired results.
6. Be wary of big promises
If a debt settlement company promises it can settle all your debts – especially for an upfront fee – that’s not a promise it can guarantee. For one thing, not all creditors will agree to negotiate with a debt relief company. If a creditor refuses to negotiate, you could be in for a wait of several months before the company can negotiate the debt.
That’s because if a creditor such as a credit card company won’t negotiate with the debt settlement company, the issuer must write off your debt and sell it to a collection agency. Only then can the debt settlement company negotiate with the new party to reduce the amount.
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