- The success rate of for-profit debt settlement companies is less than 10%.
- 65% of people who pay fees to these debt settlement companies leave their programs without ever receiving a settlement.
- The amount of money that people pay in fees to these companies almost equals the amount of money that they save. However, this is before creditor late fees, penalties, and interest are added in (these can often double or triple a debt by the time a settlement is negotiated). So at the end of the day it seems fair to say that the vast majority of people who deal with these companies do not save any money and are often left worse off in the end.
- GAO Report: Debt Settlement Fraudulent, Abusive, and Deceptive Practices Pose Risk to Consumers
- Business West Magazine: Red Flags: Separating Hype from Reality on Debt Relief
This situation is best summed up by Federal Trade Commission Chairman, Jon Leibowitz, when he concluded, “Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.” (Source: FTC Website)
In addition to the dangers outlined by these U.S. government agencies, here are more hazards of pursuing a debt settlement with a for-profit company:
Settling your debts for less than you owe is not a common way to deal with debt. Here’s why.
Debt Settlement Scams
If something sounds too good to be true it usually is. Here’s how to spot a debt settlement scam.
Are you curious about what credit counselling is or how it works? Here’s what you need to know.