I loathe predatory businesses like debt collectors. But debt settlers aren’t much better. Thankfully, Smart Money is running a great overview on why it’s a bad idea to work with debt settlement firms.
One of Smart Money’s warnings is be careful not to get sued.
Since debt-settlement companies instruct consumers to stop paying their bills while they’re saving for a settlement, their balances continue to swell with interest and late fees and their credit scores plummet. In order to get paid, creditors may even sue — and these days, companies do that some time in the second year of nonpayment. With most debt-settlement plans taking 36 months or longer to complete, the chances of getting sued are pretty high.
That’s a pretty serious warning, don’t you think?
Robby Birnbaum, an attorney and member of the board of directors of the Association of Settlement Companies estimates there are 600 to 800 such companies nationwide. With the economy the way it is that number is likely to go even higher.
AmEx Ain’t Havin’ It
American Express says it only works with debt-settlement companies when the company sends a “cease and desist” letter forbidding AmEx to contact the consumer.
“We really don’t think that there’s a service or benefit that a debt settlement company will offer our card members that they can’t receive directly from us,” says Desiree Fish, an AmEx spokeswoman.