My job is to fight banks, mortgage companies, credit card companies and
debt buyers. While we usually get good results for our clients, every
person I meet comes to our office because they have some kind of problem
that they need fixed. Many of my clients have been victims of so called
“debt negotiation” companies so this seems like a good topic
to write a warning about.
There are companies which advertise that they will help reduce your debts
by negotiating with your creditors or consolidating all of your debts
into one single debt. While there are some legitimate companies which
offer these services, many,
MANY of these companies are skirting the edge of the law and ripping off their
clients. Nearly all “debt negotiators” are scams.
The representatives of these companies often promise results or guarantee
success or promise refunds if they don’t succeed. These promises
are hollow and the contracts that people sign with these companies almost
always make clear there will be no refunds. Consumers are generally not
given an opportunity to read the contract before signing it or lied to
about the contents and encouraged to sign without reading them. Even legitimate
debt negotiation companies rarely offer a “money back” guarantee
and no company can guarantee success.
Here is the way the most typical “debt negotiation” scam works.
Suppose you owe $5,000.00 to various creditors and you have $1,000.00
in your bank account now. You go to a “debt negotiator” and
they offer to help negotiate with your creditors. You give your $1,000.00
to the “debt negotiator”. If they are true criminals, they
take your money and you will never hear from them again though that is
a minority of cases. What happens more frequently is that they charge
an “administrative” fee representing a large portion of the
$1,000.00 given, say $400.00. In this example, that leaves them with $600.00
to pay your creditors. The debt negotiators then pay each of your creditors
a little money until the $600.00 is gone, then go back to you and say
“Well, we ran out of money, do you have any more to pay them?”
Debt negotiators have no leverage. The banks and credit card companies have
NO reason to give them any better of a deal than they would have offered
to you. Debt negotiators do not have any special knowledge and skill.
If they are successful at all it is because a creditor was already willing
to set up a payment plan or take less than was owed for a debt and if
the consumer had called them directly, they very possibly could have gotten
the exact same deal. Many debt negotiators are essentially call centers
and have very low standards in who they employ.
If you are being pursued by creditors, I would encourage you to try to
contact your creditors yourself to work out a payment plan. Few if any
“debt negotiators” can get you a better deal than what you
could have negotiated on your own. If you have been sued, contact our
office or another law firm. We have had a great deal of success helping
people fight their creditors and when we negotiate on our clients behalf,
we negotiate from a position of strength.
This document has been provided for informational purposes only and is
not intended and should not be construed to constitute legal advice. Please
consult your attorney in connection with any legal issues related to the
matters discussed in this article as the applicability of state, local
and federal laws may vary.