Love them or hate them, Debt Settlement Companies have now pushed their way into the mainstream.
This has of course caught the attention of the powers that be, and now there is a rush to regulate these programs.
But what are these programs and what do they actually do for consumers? Are they the White Knights riding in to rescue the poor downtrodden consumer, as their commercials suggest? Or, are they they evil, modern day carpet baggers that the regulators claim are robbing consumers blind while making their financial situations worse? For purposes of this Article, when I talk about Debt Settlement Companies, I am going to be specifically talking about 98% of the Debt Settlement Programs out there.
Of course there are always exceptions to the rule and there are a few programs that actually do things very differently and focus on the consumers needs and circumstances.
Here is the typical sales pitch that you will hear from a debt settlement salesman hoping to sign you up into their program.
It is your Lucky day Mr.
Jones, we have a great solution to your financial troubles.
Let me outline the benefits of becoming a client of ours.
1.
We will negotiate with your creditors and cut your debt in half.
2.
We will give you low, easy monthly payments that you can afford.
3.
We will contact your creditors and tell them to stop contacting you.
That sounds like an answer to your prayers.
Well not so fast.
That is the sales pitch.
Let me draw upon a few years of experience helping consumers out of tough financial situations to interpret what the salesman actually means.
1.
We will automatically siphon money out of your account every month to cover our enormous fee (usually 15% of your debt).
2.
If you are still sending us money after our fee is collected, we will start to set it aside to settle your Debts.
3.
Your creditors will not get any money until after we get our fee (for doing what I am still not clear).
4.
By making these low payments it will take years before you have enough money to settle the debt and you will likely be sued before you get there.
5.
When we send these letters to have the creditors stop calling you it will really increase your chances of getting sued.
6.
I only need to fool you for a few months because we will get our entire fee upfront.
These Debt Settlement Companies operate on volume and it is all about sales.
In fact sometimes up to 80% of your fee is actually going to the person or group that sold you into the program, not to perform this excellent service that you are led to believe you are receiving.
The concept of Debt Settlement can make sense in certain situations but it is imperative that you educate yourself on the financial strategy of Debt Settlement before contacting a Debt Settlement Company for a free Consultation (Sales Pitch).
Most of them earn their money when they sell you into the program not when they solve your problem.
If that isn't a huge red flag, I don't know what is.