How to Tell If a Debt Settlement Company Is a Scam

Aaron Hall

Last Updated: July 8th, 2020

Where there are people in crisis, there will always be other people looking to take advantage—and the debt settlement industry is no exception. Unfortunately, it only take a few rotten apples to make the entire debt settlement industry as a whole look shady and foreboding, which poses a major problem to legitimate companies out there to help those in need.

There is a short list of things to look for when a scam artist is posing as a legitimate debt consolidation company. Here are the things you should look for.

Tall Upfront Fees

The biggest indicator you're being scammed is the upfront fees. Scammers will try to get you to pay large sums upfront, claiming that it's for legal expenses or something of the like.

Don't believe this. A lot of scammers will try to take as much money as they can upfront, then split before they pop up a few months later under a new name, address, and phone number.

Lofty Promises or Guarantees

A good rule of thumb is that if it sounds too good to be true, it probably is. A lot of scammers will try to lure you in claiming that they have access to a special government program or have a special/secret method to completely eliminate your debt. Occasionally, they'll claim to reduce your debt by some substantial number, such as 70 or 80 percent.

Don't believe this. If the company is touting itself as a company that can promise you the moon, they definitely have something fishy going on. Move along.

Pushy Reps and Scare Tactics

If your debt settlement company has all the shrewd pushiness of a used car salesman, you'll want to turn away. They'll likely use words along the lines of "quick" and "painless," or they may also try to scare or intimidate you into thinking that if you don't sign now, you'll miss out on something.

Don't believe this. The truth is, paying off debt is long and painful. There's no way around it. A proper debt settlement company will have professionals helping you through the arduous process of repairing your credit, but don't expect to crack open a cold one and relax in your chair while it happens. Real professionals won't try to scare you into signing with them; they'll help make you aware of your reality, and give you the cance to make an informed decision first.

Jamming Communication

One of the biggest red flags of all is if the debt settlement company tells you to stop paying your bills and sever communications with your creditors for whatever reason.

Don't believe this. A legitimate debt settlement company will never tell you to do these things.

No Accreditations

There are actually organizations in the financial industry that serve as watchdogs over debt help companies. It's true! If a company has accreditations from one or more of these organizations, you can feel confident that they're more than likely legitimate.

  • AFCC (American Fair Credit Council)
  • BBB (Better Business Bureau)
  • IAPDA (International Association of Professional Debt Arbitrators)

Keep in mind that you shouldn't just believe the scammer if they say they're accredited with these organizations. It would be wise to visit these organizations' websites and look to see if the company's name is listed in their registry. If it is, that indicates a big thumbs up that the company is legitimate.

Where Do I Go?

Believe this: not only are there plenty of legitimate debt settlement providers out there, but there there are also a few trusty resources, like, which ranks and reviews companies from best to worst. Currently, the top ranked companies in the debt settlement industry are Freedom Debt Relief and Pacific Debt Inc.

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