You’ve probably heard the advertisements on urban radio urging consumers with at least $10,000 in debt to call a number right away for a financial rescue. Promising to end debt troubles by getting creditors to somehow accept less money than what is owed can sound really appealing. In reality however, consumers mired in debt may often find debt settlement programs to be costly, misleading, and far less helpful than the radio ad promises.
In the newest chapter in the research series titled The State of Lending, the Center for Responsible Lending finds that debt settlement is a risky strategy that can leave consumers more financially vulnerable and still laden with debt years after they enroll in such a program.
Regardless of how well a consumer follows the instructions of his/her debt settlement firm, they may ultimately be unsuccessful because many creditors simply refuse to deal with debt settlement companies.
According to the report, “Debt settlement companies do not tell consumers whether creditors will work with their firms at the time of enrollment. However, even if debt-settlement companies were required to disclose whether a particular creditor routinely works with their firm, this provides no real guarantee. In many cases, the party who owns a debt changes over time, since a debt may be sold successively to multiple parties.”