Debt settlement companies offer services such as credit card negotiations, in which they act as a third party between the debtor and the creditor. They often seek to arrange lower monthly payments, reduce the overall debt owed or obtain a lowered interest rate on the account. Although anyone maintains the right to negotiate directly with their creditor, many prefer to use debt settlement companies for the ease of the process.
Many of us have considered debt settlement options at one time or another. These companies claim to help you “settle your debts for less”, often promising quick and easy debt reduction for a small fee. However, for every one legitimate company is many more non-reputable companies looking to scam debtors into bad debt negotiations.
Fortunately, new laws make it easier for debtors to reduce their debts in a confident manner.
Peace Of Mind
On October 27th of 2010, new laws were passed that made settling debts much easier for consumers. Previously, debt settlement companies could charge their service fees upfront, which has lead to many people paying and not receiving services in return. Under the new law, debt settlement companies cannot charge their fees upfront. Further, the company is prohibited from charging service fees to consumers if they are unsuccessful at settling the debt. The new law states that debt settlement companies must obtain at least a 35 percent reduction in your total debt balance in order to get paid. If the company doesn’t settle 35 percent of the debt, the company does not get paid.