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Debt Negotiators/Debt Settlement - What you need to know
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4/10/2010
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Demand has surged for debt resolution options as more Americans are unable to pay their debts. The Debt Negotiation/Settlement industry has exploded in recent years. Hundreds of private for-profit companies and law firms operate in this space - often fueled
by telemarketing boiler rooms. There are many reasons why the debt settlement industry is under scrutiny by the FBI, Secret Service, State Attorney Generals, and other financial crime regulators: deceptive marketing, high fees, poor service, severe consequences
for customers – they’ve got it all.
How Debt Negotiators Work - Fee Models and Business Practices
The basic pitch is to convince consumers to discontinue any payments to their creditors in the hope that your creditors will write off the debt and reclassify it as less collectible, and ultimately agree to settle for a greatly reduced amount. They instruct
their clients to stop paying credi?tors and to make payments to their company instead, promising to offer a settlement to a creditor as soon as they’ve accumulated enough of the client’s cash to do so.
Typically, customers are told to set up a separate bank account from which they make payments each month to cover the negotiator’s own fees and to build up cash that will later be used for creditor payoffs. Settlement companies often emphasize that they do
not control these funds, or that the account is managed and even disbursed by the client. However, some debt negotiators do structure their business in a way that enables them to withdraw funds directly.
[Read more about debt negotiators...]
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