Debt consolidation and settlement companies aren’t above misleading the public in an effort to drum up their business. Even the executive director of the debt-settlement industry’s major trade association admits this. As in any industry, the debt consolidation and settlement business has its share of bad actors. These companies try to trick consumers into debt consolidation or settlement services that they don’t need or can’t afford. They mislead consumers about the interest rates and fees that they’ll pay to either settle or consolidate their debt. And they do it all while claiming to act in the best interests of the customers. While most companies that operate in the debt consolidation business are legitimate and honest, the ones who aren’t give the entire industry a bad reputation that it never can quite shake.
Misleading Marketing
David Leuthold, executive director of The Association of Settlement Companies, a trade organization serving debt consolidation and settlement firms, recently wrote a letter to members about some of the misleading marketing practices that some debt relief companies are using to reel in customers. According to Leuthold’s letter, some companies are sending letters to consumers that are written on what appear to be government documents. Some even use logos that resemble existing government agencies or refer to their programs with names such as “U.S. National Debt Relief Plan.” Of course, none of these companies are officially affiliated with any government plans or programs. Consumers who assume they are may mistakenly work with them thinking that they are actually receiving relief from the federal government.
Educated Consumers
Consumers can protect themselves by asking the right questions before they work with any debt consolidation or settlement company. They should ask companies if they are affiliated with the federal or state government. They should ask if they are working on behalf of government programs. Most times, the answer will be “no.” This doesn’t mean that these companies are not legitimate, ethical providers of debt relief services. But consumers should enter an agreement with them knowing full well that they are for-profit, not government, entities.
Bad Reputation
The debt consolidation and settlement industry has long enjoyed a reputation on par with payday lenders, used-car salesman and personal-injury lawyers. Much of this reputation is undeserved. After all, debt consolidation firms serve an important function. They are often the option of last resort for struggling consumers. However, whenever companies in this business engage in deceptive marketing or other practices, they reinforce the notion that all the firms engaged in debt relief are scammers. It’s an unfortunate situation.