The 5 Biggest Myths that Debt Settlement Companies tell Consumers

Salesmen in general have a nasty habit of stretching the truth or perhaps misleading a potential client in order to close a deal. Debt settlement salesmen are no exception. The following is a list of the top 5 lies/myths told to consumers by these rascals.

5. You need a Licensed Attorney to settle your debt.

Typically you will hear this when you are speaking with some attorney firms or companies that borrow an attorneys name and claim to be an attorney firm. There is not much an attorney can do for you in regards to debt settlement that anybody else couldn't do on your behalf, or you can do yourself for that matter. Sure it might give you a warm fuzzy feeling to think you have an attorney on your side, but make sure you read the fine print. In most cases you will see in the contract that it states specifically that this is not a contract for legal representation. So you are paying high fees to hire an attorney, without getting the benefit of having an attorney, which is representation in court if the need arises.

4. We can get you a really small payment with our great 4 or 5 year programs.

If a salesman tries to enroll you into a 4 or 5 year settlement plan, he/she is setting you up for disaster. Debt settlement is not about a small monthly payment. Debt settlement is about paying your creditors back as quickly as you can with the money that you have. This is not some used car that you are buying. The payment will not even be going to your creditors, but likely parked in some third party account doing nothing for you. If they are touting the low payment as one of their best benefits, then they have not explained how settlement works and seem to be more concerned with collecting fees from you. A legitimate debt settlement plan should rarely be over 2 years and at most 3. If the proper funds cannot be raised within that time frame, debt settlement is not a realistic option. Anyone trying to convince you that it is, has alternative motives.

3. You know we are a good company because we are a member of Tasc.

The Association of Settlement Companies (TASC) is a trade organization for the debt settlement Industry. Most of the people on the board of directors, either owns a settlement company or has very close ties to a settlement company. They earn revenue by collecting dues from paying members (Settlement Companies). The standards for membership into Tasc are very low. In fact many of the settlement companies that are being investigated or have been shut down were or are in fact members of Tasc.

I don't have a specific problem with tasc, they definitely do some good work by potentially weeding out the worst of the worst. However, just because a company is a Paying member of tasc in no way equates to some gold standard for settlement companies. The way these salesmen throw this designation out it is as if Tasc is some independent third party organization that only selects the best of the best for inclusion into their membership. This is absolutely a myth.

Tasc definitely does not regulate the fees that their members charge. A settlement company can be a member of tasc and charge you 20% of your debt as a fee. So membership of tasc alone doesn't tell you much about the level of service you are likely to receive. There are very good settlement companies, that prefer not to be members of Tasc because they feel that the association would actually lump them in with a lot of bad players and tarnish their image.

2. Debt Settlement is a simple and Painless process.

Almost all debt settlement salesmen use what I call the Peaches and Cream approach. They tell you, all you need to do is make one simple monthly payment and they will solve all of your financial problems with out any hassle. To say this is a misleading statement would be kind, it is a flat out lie. Debt settlement isn't fun, it is a hassle and once you go through it, you will not want to go through it again. Sure you may be in a position that settlement is a financial necessity but make no mistake, you are not going to enjoy it. If anyone gives you a line about low easy payments with no creditor phone calls and no hassles just politely hang up on them.

By far, the number 1 myth that is told to unsuspecting consumers to convince them to sign up into bad programs is:

1. We get volume discounts on all of our settlements since we are such a large company.

If you have talked to a few debt settlement salesman, then you have heard this line at least once. Guess what, it sounds good, logical, and it makes you think you need to hire them, but it is absolutely 100% totally bogus. It is true, they settle a whole bunch of accounts at once, but they do not get better deals then if they were negotiating individual accounts. This isn't Sam's Club or Costco. You do not get a discount when you settle in "volume." In fact, not only is it not true, in some cases you may actually get a worse settlement.

In a severe financial hardship, an individual may be eligible for a settlement of 10 or 15 cents on the dollar. If that is possible for a specific individual then how can settling in volume get them a better deal? Actually in volume they would get a worse deal because they would just have to take whatever settlement was being offered to the group. You can't negotiate on individual circumstances when settling 100's of accounts at once. Large settlement companies basically made this up because it sounds good and they needed an excuse to tell their clients that since they mainly focus on sales, they have entirely too many clients to possibly provide the individualized attention that the client should receive.

There you have it, the top 5 myths debt settlement companies tell consumers. Remember, if you hear any of these babies, your BS meter should kick on. For more information about your options for dealing with debt please visit Debt Settlement

Damon Day is a Personal Financial Consultant specializing in creating plans for individuals to get out of debt and build wealth. Saving your way to wealth, is a realistic way for the average person to amass a healthy net worth. With a modest salary you can become wealthy simply by making wise choices with your money and staying out of debt. His website, Debt Settlement focuses on educating consumers about all options available to them. If you are considering a debt settlement approach, then you should first watch his straight forward video about what debt settlement is and how it actually works, so you can find an Honest Debt Settlement company to help you through the process.