The debt settlement industry has been criticized for many years due to the nature of the marketing techniques used by debt settlement companies. Many of the marketing techniques are questionable or misleading, and some common representations are downright false. The following is a list of common deceptive, misleading or false statements commonly made by debt settlement companies. The list is by no means exhaustive.
- Your debts are too small; thus, it is not worth a creditor’s time or money to sue you. This is false. A creditor will bring an action in the State of Ohio to recover very small sums of money. Every single month in the State of Ohio, creditors bring lawsuits to recover sums of money between $500.00 and $1000.00 and of course, sums in excess of $1000.00.
- You will not be sued because you have engaged the services of the debt settlement company. Most debt settlement companies will specifically disclose in the contract that a creditor might still bring a lawsuit against you while at the same time telling you it is highly unlikely that you will be sued. This is false, and in fact, the opposite is true. If your program requires you to cease paying your debts for a period of 36 to 48 months, which is a very typical program, then you will likely be sued. It is possible that your creditors will not bring an action against you, but it is highly unlikely.
- Debt settlement is better for you than a bankruptcy. This statement is false when made on a general basis. It is altogether possible that bankruptcy is the proper course of action given your particular financial circumstances. You must explore all available options in order to make an informed decision. Since most debt settlement companies only perform debt settlement, the company will attempt to pigeon hole you into its services.
- The percentage of debt a consumer will save by using a debt settlement company’s services. Most debt settlement companies will base the proposed plan on 30% or 40%. These percentages oftentimes do not account for the company’s fees, and the vast majority of the time are simply arbitrary numbers rather than the company’s own track record.
- The length of time a program is likely to take is often misrepresented. A debt settlement company will propose a 36 or 48 month plan knowing full well the consumer will likely get sued by one or more of the aggressive creditors on the program. This necessarily extends the program, sometimes for years.
- Debt settlement companies will oftentimes misrepresent the affect its program will have on a consumer’s credit score. Simply put, a consumer will almost always need to cease paying his or her creditors. These accounts will show up as delinquent on the credit report, and the score will go down accordingly. Debt settlement almost always has a devastating affect on a consumer’s credit score.
Even with the negative aspects of debt settlement, it may be the best option for a particular individual, but you must be fully aware of the negative aspects as well as the potential benefits in order to make an informed decision.