The Official SpringCoin Blog How to Choose a Debt Settlement Company

Warning: This article is quite lengthy. It goes over important points when you have to choose a debt settlement company.

I need to preface my answer by first making sure you as a consumer are well informed about the various debt relief solutions out there today. If you’ve done your research and understand the pros and cons of each option and decided that debt settlement is the best option for you, then read on. Otherwise I encourage you to do your due diligence and really understand how each option differs and what drawback and benefits can be attained by each option.

It’s critical that you continue to utilize your research skills to become well informed about each debt settlement company you’ve come across. After you read this article, you’ll know exactly how to choose the best debt settlement company. I encourage you to call several companies to see how they may be the best option for you – you’ll hear a variety of sales pitches, but there are 5 key things to focus your attention on during this process:

1.      Does the company have a considerable amount of complaints against them (BBB, online blogs, etc)? If so, how did they handle the complaints/issues?
a.       Most of the time, you’ll see a pattern when reviewing complaints. I relate this to purchasing a product on Amazon. If you saw that there were a considerable amount of complaints about a product, would you buy it anyway? I’m not saying some of the companies with complaints are completely bad, since people will always have a complaint but how did they resolve the issue?
2.      Advice or instructions to stop paying your creditors
a.      All debt settlement companies understand the repercussions of what happens if a consumer stops paying their creditors but they should NEVER instruct you to do so. If you’ve already missed payments and have fallen behind, you’re their perfect candidate, but if you’re current on payments, they should not be advising you to stop making payments. A legitimate debt settlement company should fully inform you on how debt settlement work, they should always inform you that:

Your Credit WILL be impacted
There is no guarantee of any settlement rates
You may face tax liabilities for any debt forgiven that is over $600
Some creditors may try to obtain a court ordered judgment
Collection calls will continue and increase over time
Your balance will increase due to late charges and interest

3. The absence of a contract or written agreement
a. Whenever you are dealing with a company that is handling your money and payments, they should always have a written agreement or contract. Don’t make a commitment based solely on a phone conversation. If need be, request a written copy of the terms and conditions of the service before you agree but if you have to request a copy then something is probably not right. More often than not, a contract or written agreement should be provided and signed by you before any payments are made.

4. Is the debt settlement company you are considering accredited by The Association of Settlement Companies (TASC) or certified by the (IAPDA)?
a. There are a handful of legitimate companies out there today who offer great products and services that are not accredited or certified. The misconception is that if they are accredited, they can be trusted and everything will go accordingly to how they promised. To give you an example, Freedom Debt Relief is an accredited company, but as you may have seen in your research, they were recently sued by the Attorney General in WA and NY for unscrupulous business practices. My suggestion is to do your due diligence on these companies – people such as yourself post complaints on debt blogs and sites and are the best people to find answers to the practices of the company. The more you read the more you know.

5. How much does the service/product cost?
a. When choosing a solution for debt relief, it’s important to make sure the program is affordable and that the pricing and fees are TRANSPARENT. If you can’t afford the monthly payments, then you’re not helping yourself, in fact, you’re putting yourself in more financial debt. Many companies hide or mask their fees so they don’t discourage you from signing on. Be cautious – if the company is not completely transparent with fees and beats around the bush, then mark them off your list. Many times, if you don’t know the right questions to ask about fees, they won’t tell you. I suggest asking them specifically to list all the fees you are liable and might be liable to pay. Have them walk through the debt settlement and payment process and tell you exactly where the payments are going and which part of the process you’d incur fees. A rule of thumb: You shouldn’t have to pay more than 15% of the total debt amount in fees (industry average), if you are, look elsewhere.

6. What is the length of the program (how long do I have to make payments)?
a. Affordability is one part of the equation; the other is the term of the program, in other words, based on your monthly payment, how long do you have to make payments to “get out of debt?” Typically, I’d recommend being enrolled in a program not more than 36-48 months. In some cases based on your debt amount, this is not achievable since your debt amount may be extremely high, thus your monthly payments may be too high. Some companies will decrease payments to make the program affordable but in some cases this will cause your term to increase significantly. I’ve heard some people enrolled in a debt settlement program for over 60 months (that’s over 5 years!!). Again, rule of thumb, a debt settlement plan should be affordable and you should be able to finish the program in or around 36 months.

7. Does the company offer any type of service guarantee? If so, what is the guarantee?
a. Steer clear of any debt settlement company that promises a quick fix to your debt problem or sugarcoats the program, i.e. debt settlement does not have a negative impact on your credit, you cannot be sued, a particular settlement is guaranteed, etc. For money back guarantees, read between the lines, ask what the procedure is to get a refund on your money. Is there a certain commitment time, do you have to meet certain requirements, do you have to send a letter by certified mail, how many days after your request can you expect a refund, and how is the payment made? I’ve heard horror stories about people signing up because a guarantee was advertised who didn’t receive a refund of their money because they didn’t dig deeper to ask more detailed questions.

8. How knowledgeable is the debt settlement company with specific creditors?
a. If a debt settlement company has been in business for quite some time, they should have some type of idea on which creditors are most likely to sue. For example, Chase & Capital One are notoriously known to sue people. Discover is known to have lower settlement rates compared to other creditors such as BoA & AMEX.

9.      Does the company make bold declarations or statements?
a.       If you’ve contacted debt settlement companies I’m sure you’ve come across one or more companies that pitch you with an idea that may seem too good to be true. Sometimes they are too good to be true. Look out for companies that declare or advertise the following:
i.      A settlement at a specific percent of your debt without any other conditions. Example: “pay only 30% of your debt”
ii.      A guarantee that you’ll be out of debt in a specific set of months” Example: “Debt free in 24 months”
iii.      You cannot get sued
iv.      Your credit score will not be impacted

There is no perfect way to evaluate debt settlement companies, but the more research and information you can gather, the better informed decision you can make. The idea is to weed out the unscrupulous and fee hungry companies who are looking to just benefit off of you financially but not actually help you better your financial situation.

If you have any further questions, feel free to ask me for help!

-Mookie