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Consumer Alert: Debt Settlement Companies

Consumers should be VERY careful about signing up for debt settlement programs. These companies and programs use names like "debt resolution", "credit management", and "debt management."  While companies that offer such services use different names to describe what they do, the general concept is the same.  Their pitch is that if you give them money, they will work out deals with each one of the companies you owe. They will often tell you that they have relationships with all the credit card companies (and debt collectors) and that for a small fee they will be able to get you good settlements with the people you owe money to. They will often tell you that you will only have to make one lump sum payment to them each month, and from that payment they will take care of all the companies to who you owe money. The problem of course is that they are often lying, or not telling you the whole truth. Credit card companies and debt collectors have no obligation to even speak to these companies and often times refuse to do so.  So, while you may believe that all of your debt are being handled by this credit management company you hired, that may in fact not be the case. Many of your creditors may not be getting paid, and you may be continuing to accrue interest on your debt, and moving closer towards getting sued. Additionally, these companies often charge upfront fees or take a large percentage of the monthly payments you make; which leaves less money to go towards you're the payment of your debt.  The Federal Trade Commission has issued new regulations that take effect in October 2010 that seek to stop the massive consumer fraud involved with these credit management/debt settlement type companies.   See

You should be extremely careful about signing up for any of these services.

Joseph Mauro discusses debt settlement and credit management.


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