Be wary of some settlement companies warns BBB

By Courtney Lane - bio | email
Posted by Ellen Krafve - email

TYLER, TX (KLTV) - In a time when Americans are cash-strapped or out of work, debt settlement ads are clogging airwaves. But the BBB warns don't be fooled. For one, these settlement companies charge you fees up front. They say it's to start paying off your debt, but Ann Harris warns, most of the time, they're not doing anything so your money just sits there for months.

"They don't begin to negotiate with these people until your actual accounts have accrued extra fees for late payments or non-payment," explained Harris.

She says settlement companies hold off until creditors are desperate for a payment, so desperate, they'll settle for less money, but, by that time, consumers are in bad shape.

"Their credit is in worse condition than it was before they went to them because those bills have gone unpaid much longer," said Harris.

Plus, you're out all the money you paid the settlement company. Any extra, they probably keep as profit. If your bills are stacking up, Harris says there are safer alternatives. For one, check out credit counseling or credit repair services. You shouldn't have to pay anything up front. Also, call the Better Business Bureau to review a company before using them. Finally, you may want to try negotiating yourself before seeking outside help.

"If they would just call the company and say,'I've hit a rough spot. I can't make the full payment right now. Can I pay a little more now or a little more later?,' some of the companies will try to work with you," said Harris.

The BBB says a safer option may be to consolidate your debt. Just be very wary of debt settlement offers.

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