How to Compare Good and Bad Debt Settlement Companies.
I am filming a segment on the differences between good and bad debt settlement agencies. If you have any short and sweet sound bites you would like me to consider please feel free to send along. Christopher
What are some differences between good and bad debt settlement companies?
I received the above question about comparing debt settlement companies in an email from an associate in the debt relief industry today. I felt I should share my reply as an addition to the debt relief question and answer section of our site. Below is my email reply with some additional points that would mostly only relate to CRN.
A good debt settlement company will first use well defined parameters for whether someone is a good fit for settling accounts.
There are other options than debt settlement that are more suited to a persons situation and financial goals. This kind of suitability test can be identified during the initial consultation. A good debt relief company will ask not only what lead to your financial hardship, but will want to know the following:
- Can your monthly cash flow support all of your other monthly bills and overhead were you to have no credit card debt?
- Can you confidently come up with 2 to 2.5 percent of your overall unsecured debt balances on a monthly basis?
- What future credit needs do you have i.e. need to upgrade to more dependable transportation, need to refinance a mortgage etc…
A bad debt settlement company will find out what your minimum payments are now and simply chop that amount roughly by half and say “You qualify for their settlement plan”.
A good debt negotiation company will provide a myriad of required disclosures about engaging in debt settlement and do so in writing through their contract for services and also in a separate one page disclosure page so that the risks associated with settlement are prominent and in plain language. A good settlement company will want to discuss these risks openly and honestly with the consumer.
A bad debt settlement company will rattle off the disclosures as part of a recorded 3rd party verification (3PV) done over the phone. Their written disclosures are set in amongst “legalese” in their contracts. When speaking about risks, a bad settlement company glosses over the disclosures often adding less than truthful spin in order to make them seem less relevant, or less likely to occur.
A good negotiation company does not charge a fee for direct negotiation services they provide until they complete each debt settlement.
A bad debt resolution company will charge advance fees often under the guise of some attorney relationship you are signing up for, but where you are unlikely to be working directly with an actual attorney for the services being offered. A clear tip off of a company like this is when they require a face to face meeting to sign you up.
A good settlement company rep will want you to take the necessary time to think about enrolling in their program and encourage you to continue your research into all of your options.
A bad company wants your commitment to sign up in their debt settlement program right then, on the first call or within 24-48 hours.
A good debt settlement company will provide you a good faith estimate in writing, not just over the phone. The estimate will be based on their experience working with your specific creditors and will include an outline of:
- the amount of money it will take to complete all settlements inclusive of their fee
- The amount of time expected to complete the program
- The earliest you can expect your settlements to be achieved
- What amount of money you will need to have saved prior to engaging in a specific settlement with your creditors
Bad debt negotiation companies do not typically want to provide these estimates in writing.
Some more comparisons that are generally unique to Consumer Recovery Network – even when compared to fair and ethical debt settlement service providers are:
A Good Company Does Not:
- We do not send out Cease Communication letters
- We do not send out Limited Power of Attorney (POA) letters
- We do not change your address with your creditors
- We do nothing that would prevent your creditors from reaching you directly in order to make direct offers to you
- Escrow your funds in any way
A Good Debt Negotiation Service Will:
- Fully educate, train, support and encourage you to get deals on your own following our guidance so that we do not have to calculate our 15% performance fee when we do the negotiations
- Encourage settlement with your original creditors whenever possible
- Limit enrollment to people who can complete a settlement program in 24 months or less
- Discuss creditor sponsored hardship and balance liquidation plans with our members and encourage participation in them when it makes sense strategically
When engaging any debt settlement service provider, weigh ALL of the above. If settling as a means to get relief from debt is a good option for you, accept nothing less than these standards. Working with companies who have these good attributes will increase the likelihood you are a success!
If you have a question or comment about a debt settlement company you have hired, or are considering hiring, post it in the comment section below in order to get some experienced feedback.