Warning Signs to Avoid Finding a Bad Debt Settlement Company

Debt settlement can be the fastest, most reliable solution to liberate you from your mountain of debt. However, choosing the wrong debt settlement company can easily worsen your financial situation. In looking for the right debt settlement company, you should be aware of the following WARNING SIGNS:

1. Avoid a debt settlement company that charges excessive fees

The debt settlement industry is constantly criticized for charging the public exorbitant fees. Some debt settlement companies charge an enrollment fee or "administrative fee" of 2-5% of the total enrolled debt, plus a debt negotiation fee of 25% on the amount saved on each settlement. The majority charge a flat fee of 15% of the total enrolled debt. In both cases, we find their fees are extreme. We only charge a flat fee of 10% on your total enrolled debt. Offering the lowest fees in the industry has allowed many of our clients to get out of debt faster. They were able to save more toward their settlement funds instead of paying more money in fees.

2. Avoid a debt settlement company that does not have a "money-back guarantee"

A debt settlement company that is confident about their services should offer a refund policy. However, many debt settlement companies do not offer a cancellation refund. In contrast, Debt Free League offers a 30-DAY MONEY BACK GUARANTEE. Within 30 days of enrollment, if for any reason, you are not completely satisfied with our services, you may cancel and get a 100% refund of your deposit.

3. Avoid a debt settlement company that misrepresents the term to get out of debt

Many debt settlement companies low-ball their debt settlement programs. The monthly payments that they quote do not estimate balance increases to the enrolled debt. This happens during the term that the debt remains unpaid, which can cause the balance to accrue additional late fees and interest charges. The following scenario illustrates the severity of this problem: Let's say you enroll a $20,000 debt balance with a debt settlement company that estimates to settle your debt for 40%. This means you would need to save $8,000 to settle your debt. However, seven months later when the debt is ready to be settled, the debt balance increases to $11,000 because of late fees and interest charges. Because of this, you'll actually need $1,200 in order to have the increased debt settled. As a result, you will need to spend a lot more money and time than what you were originally estimated. To prevent this, Debt Free League includes in all of our quotes the estimated balance increase due to late fees and interest charges.

4. Avoid a debt settlement company that "guarantees to reduce your debt" by a     specific amount

Some debt settlement companies promise or guarantee to settle your debt for a specific amount. However, according to the Federal Trade Commission, it is illegal for a debt settlement company to "promise" or "guarantee" that a creditor will accept partial payment of a consumer's legitimate debt. A trustworthy, reliable debt settlement company estimates their results based on an actual settlement track record. In finding a company with an effective debt settlement track record, you should look for a 50% or better settlement average.

5. Avoid a debt settlement company with "excessive" or "unresolved" consumer     complaints

You should not do business with any debt settlement company that has excessive or unresolved consumer complaints. To see if a company has a history of consumer complaints on issues like, customer service, advertising or selling misrepresentations, or client refunds, go online to Rip Off Report (www.RipOffReport.com). Another great source is the BBB or the Netcheck Commerce Bureau "Netcheck", which you can also visit online at www.Netcheck.com. Netcheck promotes safe shopping and ethical business practices worldwide. They have also helped consumers receive refunds totaling an estimated $4.8 million dollars.

6. Avoid a debt settlement company that manages or controls your money

Various states have laws that do not allow debt settlement companies to control or manage your money. The Federal Trade Commission has sanctioned and shut down debt settlement companies due to co-mingling and misusing their clients' money. To ensure your money is safe, Debt Free League lets our clients keep their settlement funds in an FDIC-insured savings account that is in their care, custody, and control.

7. Avoid a debt settlement company that hides or omits the facts

It is illegal for a debt settlement company to conceal or misrepresent the facts. However, some debt settlement companies hide the bad about their services. They may not tell you that you can damage your credit or that creditors can sue to collect an unpaid debt. However, we work in the spirit of full disclosure. We know it's important for you to know the facts in order to make an "informed" decision. That is why we educate you about all of the pros and cons. Plus, we will never take a dime from you unless we can effectively serve you.

8. Avoid a debt settlement company that also operates as a mortgage broker

Hurt by the recession, greedy mortgage brokers are now retailing debt settlement services. Besides charging outrageous fees, many are inexperienced in debt negotiation. As a result, they outsource debt negotiation to third-party debt settlement service providers. But quite often, this leads to substandard service and a high frequency of consumer complaints. In contrast, to provide you the best service, Debt Free League is a complete debt negotiation service provider that employs in-house expert debt negotiators.

9. Avoid a debt settlement company that offers "free credit repair"

Some debt settlement companies advertise "free credit repair" as part of their debt settlement service. But under the Fair Credit Repair Reporting Act (FDCPA) it's illegal for any company to charge an upfront fee prior to rendering services for credit repair. If a company requests that you pay an upfront fee before providing you "free" credit repair, watch out! It could be a scam. The law also requires companies that provide credit repair to be bonded.

10. Avoid a debt settlement company that guarantees to repair your credit

Under the Fair Credit Reporting Act, it is illegal to "guarantee" to fix or repair a consumer's credit. However, some debt settlement companies still make this promise. At Debt Free League, we won't sugarcoat that your credit will decline if you're not making the regular minimum monthly payments to creditors. But as a graduate who has completed our program, we also want you to know that your credit can improve. By paying off your debt, you will manage to lower your debt-to-income ratio, which is essential toward qualifying for a major purchase, such as a mortgage. It also helps decrease your debt-to-credit ratio, which composes one third of the consumer credit score.

To learn more about debt settlement, please visit the following links:

Debt Free League - Debt Settlement Tips Blog

Debt Free League - Debt Settlement Blog

FREE Debt Elimination Book