There are perhaps 1,000 firms that offer debt settlement services, according to the industry’s lobbying group, The Association of Settlement Companies (TASC). About $20 billion in consumer debt is currently enrolled in debt settlement programs, according to the association.
Ads for debt settlement companies are ubiquitous, and nearly always use the same pitch: Consumers have the “right” to have their debts reduced by 50, 60 even 70 percent, the ads say, promising information that “credit card companies don’t want you to know.”
The basic strategy these firms employ is to instruct consumers to stop paying creditors. Instead, they are told to save money in a separate account. After receiving nothing for many months, the settlement companies say, lenders will be happy to take a lump sum payment for far less than the total debt. Sometimes, it works.
The problem for consumers is that high up-front fees and additional monthly fees often mean they have very little to offer creditors after six months or a year in the program.
Read the full story here: http://redtape.msnbc.com/2009/06/debt-settlement-firms-under-fire.html
