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What Are Debt Settlement Companies?
If you’re struggling with debts, you might have seen advertisements offering to help you consolidate, settle, or otherwise relieve you of your debt. This sounds like the perfect solution. However, many of those companies are not licensed to practice law in Ohio and don’t follow through with their promises.
Topics we’ll cover in this video:
- Why are some debt settlement companies illegal?
- What are your options if you used an illegal debt settlement company?
- Tips to recognize illegal debt settlement companies
Is Debt Settlement Legit?
Debt services are often marketed as “credit counseling,” “debt elimination,” or “debt negotiation.” These are all essentially debt settlement companies. They may advertise online, through the mail, and even by phone. They also send deceptive “pre-approved” debt consolidation loan offers. But they usually come with high fees, uncertainty, and do little for you in the long run. Some even scam people by failing to perform promised services despite taking their money.
Most debt settlement companies are not licensed to practice law, so they cannot offer services like bankruptcy, even when it’s your best option. You won’t always need a lawyer to deal with debt, but it’s wise to consult an attorney about what addresses your unique situation and helps you the most.
Call Luftman, Heck & Associates To Discuss the following illegal acts:
- Debt Settlement Advanced Fee
- Debt Settlement Companies & the “Attorney Model”
- Federal Debt Settlement Laws
- Ohio Debt Settlement Laws
- Deceptive Debt Relief Marketing
“I wanted to take a few minutes to say how happy and grateful I am having you and your team on my side. I can’t believe the service I got from the very beginning [and] the effort you and your firm put into helping your clients is unbelievable.”
LUFTMAN, HECK & ASSOCIATES CLIENT
Signs of an Illegitimate Debt Company
Legitimate debt companies should be accredited by the Council on Accreditation (COA) or International Organization for Standardization (ISO). They may also be a member of the National Foundation for Credit Counseling, accredited by the COA.
The debt counselor you work with should have passed a certification exam. They should understand debt counseling, budgeting, consumer laws, debt management, and bankruptcy.
You can also review debt settlement companies on the Better Business Bureau and see if any complaints have been filed against the company with the Ohio Attorney General.
They Make Empty Promises
Illegal debt companies violate state and federal consumer laws. They may make promises they cannot keep or don’t intend to keep. If a debt settlement company promises to eliminate all of your debt and get it all removed from your credit report, they are likely making empty promises.
If a company violates the Fair Debt Collection Practices Act (FDCPA) or Federal Trade Commission (FTC) Telemarketing Sales Rule (TSR) or other state and federal regulations, then they are operating illegally.
Common illegal actions taken by debt companies include:
- Collecting fees before they settle, alter, or reduce your debt
- Making dishonest claims about their services
- Failing to make proper disclosures about debt relief services
- Making misrepresentations about the outcome of their services
- Failing to have you sign a written contract
- Failing to keep your payments in a separate trust account
Other Debt Settlement Red Flags
There are usually some telltale signs that a debt company operates illegally.
- It’s too good to be true: Dealing with debt is a complex process no matter what path you take. If a company promises to handle your debt quickly without significant input from you, they are likely lying.
- They refuse to tell you their fees: Federal regulations require debt settlement companies to be clear about their fees, and they cannot charge you until they’ve completed some work. If they try to charge you before they do any work or negotiate settlements for you, they are violating the FDCPA.
- They only give you one option. There are many ways to handle outstanding debt. A legitimate debt company will be able to explain all of your options and help you decide which is right for you.
- The company guarantees results: If they have not already reviewed your situation and negotiated with collection agencies and creditors, then they have no way of knowing your outcome. Their promises are empty and should not be trusted.
- They promise to stop legal action against you: Only bankruptcy can prevent things like wage garnishment and civil litigation against you.
What If I Already Used a Debt Settlement Company
If a debt company has promised something and failed to follow through, you have options. First, contact LHA to determine if the company violated any state or federal laws. If they did, you might be able to get compensation by filing a consumer lawsuit.
Additionally, you will need to take control of your debt immediately. Our debt lawyers are licensed to practice law in Ohio and offer sound debt relief advice. We can help you negotiate settlements or look at filing bankruptcy if you cannot repay your debts.
LHA offers you multiple options for your debt and will not pressure you into the path that is not best for you.
LHA Manages Ohio’s Debt
- New Philadelphia
Call LHA Today: 888-726-3181
Initial Consults are Free and No-Obligation.
FAQs: Illegal Debt Settlement Companies
Is Debt Settlement My Only Option?
Probably not. Debt settlement is only one debt relief option. A licensed attorney can best explain other programs that may benefit you. You may be a candidate for a debtor defense lawsuit, or if you ultimately feel bankruptcy is best, then a lawyer can guide you through the process.
Are Debt Companies Regulated?
Although debt settlement companies are supposed to follow state and federal laws, they often do not. Most have hundreds of bad reviews on the Better Business Bureau website and Google discussing how they’ve scammed others. On the other hand, attorneys are held to a high standard. If an attorney violates these standards, they could lose their license.
Do I Need a Lawyer?
Debt settlement companies are not licensed to practice law. If a creditor sues you, you will ultimately have to get a lawyer anyway. You might as well begin with an attorney who understands consumer law and can protect you against any litigation that comes your way.
A debt lawyer will also protect you against the illegal actions of creditors, collection agencies, and debt relief companies. If your rights are violated, an attorney can file a lawsuit and help you get compensation.