There are always commercials for companies offering to settle your debt for pennies on the dollar While debt settlement is a legitimate industry, the nature of the business does invite some less than savory companies trying to take advantage of people who feel that they have nowhere else to turn. If you’re considering debt settlement, it’s important to make sure that you’re working with a reputable company that will be working in your best interest, and that you don’t fall victim to debt settlement scams.
Laws Regulating Debt Settlement
There are a number of laws and regulations that govern debt settlement companies, and being aware of them can help make sure that you’re working with a legitimate company. Any company that attempts to break these laws shouldn’t be trusted to have your best interest in mind, and may be attempting to take advantage of you and your situation.
The first and most important law that regulates debt settlement companies has to do with payment. Federal law prohibits charging for services for debt settlement until the debt in question has been settled or resolved. Companies are allowed to charge small administrative fees up front, but there are limits on this. Any company that attempts to charge you for services before you get results is in violation of federal law, and shouldn’t be trusted.
One of the most common steps for debt settlement is to have the consumer set aside money each money to build up a large lump sum payment they can use for the debt settlement. Consumers deposit this money into an account that they do not control to ensure that it goes towards making the debt settlement payment. However, the debt settlement company isn’t supposed to be in control of the account either. Rather, these accounts need to be handled by an independent third party. Any company that tries to get you to deposit this money into an account with them is likely trying to scam you. You should do your best to ensure that the money is administered by a third party so that the company cannot withdraw the money and close up shop.
Other Signs of Trouble
Just because a company is following the letter of the law doesn’t mean that they aren’t scamming you. There are some other things that you should look out for to ensure that you get the best results possible from your debt settlement company.
First, compare the fee structure or commissions that the company charges to other companies in the area to make sure that they are in line with expectations. Some companies bill themselves as luxury or boutique debt settlement services, and charge more for their services without a noticeable difference in the quality of the services delivered.
Another good step to ensure you’re working with a legitimate company is to check out reviews of them online. These should come from customers and ideally will be found somewhere other than the company’s website. If the only good reviews on the company are on their website, then that’s a sign of trouble and should be a warning the company doesn’t deliver the kind of results that you might be expecting.
Trust Your Gut
One of the best things you can do to protect yourself from debt settlement scams is to trust your instincts. If something sounds too good to be true then it probably is. Make sure that you trust your sense of danger, and don’t be afraid to back out of a situation that seems suspicious. Remember, that you can always stop any transaction before money changes hands, and come back to it later if you decide that you feel safe about the deal.
As you can see, there are a number of ways that a phony debt settlement company might try to scam you. However, by following the steps outlined in this guide, being aware of the law, and trusting your gut instincts, you can avoid being taken advantage of and falling into an even worse financial situation. After all, most people use debt settlement as a way to save money and get out of precarious monetary circumstances, not find themselves in a worse situation than they started off in.