Nightline Busts these Debt Settlement Scams

“You Can Get Out of Debt in less than 3 years and only owe 50% of your Debt.”

These are the outrageous claims coming from debt settlement companies.  In my book Deceptive Money, I give the debt settlement industry, or debt solution companies as I call them, their own chapter.  I dedicated a chapter to them as well as a single chapter to credit counseling and debt management programs as a warning to everyone who wants to get out of debt the right way.

There are over 2000 debt settlement companies operating in this country.  Desperate consumers flock to these companies hoping that they will be saved from their escalating debt problem.  These companies instruct you to stop paying on your debt and let all of your debt go into default.  Of course, that is the worst advice anyone could take.  As I write about in the book, the key to getting out of debt is to NEVER let your accounts go into default.  

Then they instruct the new client to start paying them on a monthly basis while they negotiate with the creditors for a pay-off.  The whole idea is to accumulate enough money so their “skilled” negotiators will be able to have a settlement.  The reality is that little goes on with these companies while they collect your money.  The bigger problem is that the first 12 to 24 months of monthly payments does not go towards the debt.  It goes towards 95% of their fee.  They get paid first.  Now, you can see how they are ripping people off.

One customer of Dallas Based Credit Solutions told reporters that for over 20 months she made her payments and not a single one of her creditors had been contacted.  She paid their fee and watched her debt increase from $ 13,000 to $ 18,000 because of fees and penalties. 

The Better Business Bureau had over 1,600 plus complaints about this particular company.  The Texas Attorney General filed a lawsuit this year against them for deceptive practices. 

As I write about in Deceptive Money, you really don’t need any of these companies.  The key is learning all of your options and going through the correct process.  It is a big game and you need to know how the game is played.