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About Debt Settlement and the BBB

There is a lot to know about debt settlement and the BBB. In recent news, the Better Business Bureau has stripped some debt settlement companies from their accreditation, which has effectively placed the whole industry in the negative light.

Debt settlement is the negotiation of the total debt amount down to less that the full amount. Negotiating accounts can be done by the consumer (do-it-yourself) or by using the help of debt settlement companies. What's even better is if the account is assigned to a third party collection agency after the charge off.

The reason for this is that collection agencies are not expecting to collect on the full amount, which is the expectation of the original creditor. Most collection agencies would agree to settle in the 30-70% range and accept that as the full payment.

 


So, why have the complaints risen? Aside from the fact that in every industry, there are bound to be fakes and con artists, it could also come from misunderstanding when it comes to the fee structures. The industry standard is 15% of the total debt amount (spread over a period of time, the most I've seen is 15-20 months) or 20-25% of the settlement amount.

As to how the service fees are collected depends on the company. Is debt settlement a debt relief scam? No, it is not. Do scam artists exist in this industry? Of course, they do, and they are everywhere - just like with anything that you can shop for. The best that the consumer can do for protection is to check the company's background before signing up. Always do your homework!  

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