It is important to analyze credibility to determine the best debt settlement company. The Federal Trade Commission created guidelines to protect consumers with credit card debt. They ban advanced fees, set specific rules for settlement savings accounts, and prohibit misrepresentations. Distrust any company that charges upfront fees. There are several agencies that accredit companies, including the American Fair Credit Council (AFCC) and International Association of Professional Debt Arbitrators (IAPDA). The AFCC requires companies to train staff, provide clear client agreements, and written policies and procedures. The IAPDA requires a certain percentage of staff to receive certified training.
Debt Settlement Effects
Debt settlement has several consequences and no guarantee of success. Creditors are under no obligation to settle debts for a lower amount. Be skeptical of any company that guarantees a certain amount or percentage, especially in a short period of time. The process may take a couple years. Additionally, debt settlement
negatively impacts credit scores. Settlement programs often ask customers to place money into a saving account rather than pay their creditors. This results in missed monthly payments which reflect poorly on credit reports. Furthermore, there may be tax consequences with debt settlement. The IRS can collect taxes on forgiven debt.
Pricing and Fees
It is important to understand the price and fees associated with debt settlement. Most companies charge a percentage, either of the debt enrolled or debt saved. It is important to understand how companies assess their fees because 20 percent of enrolled debt will be larger than 20 percent of debt saved. Companies often offer a free consultation to help potential customers determine whether debt settlement is right for them. This is also an opportunity for consumers to find out about specific pricing for their unique circumstance. Again, companies should not charge any fees before a debt settlement agreement is formed. There are some companies that offer a money-back guarantee.