Debt Settlement Scams

With consumer debt at an all-time high, people are looking for solutions to their problems in many different ways, including filing bankruptcy, entering credit counseling programs and working with debt settlement companies. Unfortunately, that sense of desperation has also caused some consumers to fall prey to companies with unscrupulous business practices. Although there are many reputable companies, there are also a number of debt settlement scams.

If you are a consumer looking for financial relief, there are several proactive measures you can take to avoid being misled by a debt settlement company. Keep in mind that there are reputable organizations out there, just as there are with any other type of business. One key indicator of how legitimate a firm is how they collect their fees. Of course companies who collect fees only based on their performance, such as JDS, are far more reputable than ones who want to be paid before completing the service.

It's always best to go into the process skeptical until your questions can be answered to the degree that you have no remaining doubts. Another important consideration is that many settlement specialists work on commission, so that can influence how your account is handled.

How to Proceed if You Have Been the Victim of a Debt Settlement Scam

If you have already given money to a debt settlement company and have no tangible results to show for it, you don't have to assume that your money is wasted. It is possible to get your money refunded if you follow some very specific guidelines, starting with submitting a formal complaint against the debt settlement company. The formal complaint letter should be factual, so take care not to just hurl accusations and forget to provide any evidence to back up your claims of fraud. Although you are understandably angry and upset, a balanced, non-emotional approach is likely to get you better results.

In your letter, outline when you first contacted the debt settlement company, the services they offered and the actions you took based on their offers. Be sure to include a timeline, and names and dates of people you spoke to. You can end the letter stating the actions that you were promised and that you have yet to see any results on them. If you have this information in writing, you can include a copy of it with your letter. That way it will be hard for the debt settlement company to deny the promises they made you.

After the debt settlement company receives your letter, it may try to present evidence showing that you did indeed agree to their services and to pay the fees that you have given them. If the contract is illegal or fraudulent, you don't have to let it concern you. It will be declared "fraud in execution" and you can ignore their response and proceed with trying to get your money back.

When the Company Does Not Respond

If the debt settlement company does not respond to your formal complaint or if it lodges false accusations against you, your next step is to file a formal complaint against them with the Better Business Bureau (BBB). To do so, you will need to find out the city and state where the company is actually located. After the BBB has received your complaint, they will perform a follow-up investigation. Hopefully, this will prompt the debt settlement company to respond immediately and to refund your money.

One possibility to be aware of is that many debt settlement companies are so shady that they have had many BBB reports filed against them and will not bother to respond to yet another complaint. Being threatened with a low rating from the BBB will have little effect on them if they already have one. However, you are not helpless in this instance. You just need to take even more steps to get your money back and have the dishonorable company put out of business.

If your own letter of formal complaint to the company and a BBB report yield no results, the next thing you have to do is contact the Attorney General in your own state. Depending on the laws of your state, the Attorney General may request a copy of the report you filed with the BBB before he or she agrees to work with you. If the Attorney General of your state can verify the information you have provided, a lawsuit will be filed on behalf of you and any other customers in your state who have also filed formal complaints against the debt settlement company. They will then be forced to pay your money back or face jail time.

Tips to Avoid Debt Settlement Scams

If you are just starting out the process of trying to find debt relief, there are several things you can do ahead of time to make sure that you are dealing with a reputable debt settlement company. If you are contacted by such a company and have a genuine interest in their services, ask for their telephone number and call them back. If you have caller ID, call the number that appeared on your monitor to see how the telephone is answered.

You should also ask the representative for a complete mailing address of the company, and not just a post office box. This tells you that the company actually exists, and you are not being contacted by a prisoner or a scam artist working out of their own basement. If the company is bogus, the representative will be hesitant to give you this information and will instead try to steer you into immediately signing up for their program. Don't fall for it.

Even if you located the debt settlement company yourself, you should never agree to work with it until you have requested a report from the Better Business Bureau. This report indicates how the company handled any reports that have been filed against it in the past. You should also ask for professional references, such as settlement letters or information about their membership in a trade organization. Again, be very leery of any debt settlement company that is defensive or hesitant about providing ways for you to check them out before you sign up for services. You should never feel pressured, and should take all the time you need to insure that the company will represent your best interests.

Legitimate debt settlement companies usually belong to a professional trade organization, such as the Association of Settlement Companies (TASC). Ask the person you are speaking with the names of any organizations that the company belongs to. If the debt settlement company representative gives you a name, verify it on that organization's website. It may cost a small fee to do this, depending on the policies of the trade organization.

Be very careful if the debt settlement company that proposes you stop paying your bills if you have made clear that you have no problem affording them. Settling your debt is only recommended for people who are behind or on the verge of falling behind on their payments.