If there’s one thing synonymous with debt relief in this country, it’s scams. For a while, it wasn’t clear whether it was trendy or proper to blanket the entire scope of debt relief as an illegitimate industry. While online consensus about debt relief is still very much mixed, the overarching question becomes: if debt relief has such a bad reputation, why do so many providers exist?
As the case with many things, the proof just may be in the pudding. Let’s look at what debt relief providers offer and why they make sense for certain debtors.
Not All Debt Relief Is Debt Settlement
Before we jump into why debt settlement providers exist, it’s important to make the distinction that debt relief and debt settlement aren’t necessarily the same thing. Debt relief is an umbrella term that includes debt settlement — but it can also include debt consolidation and debt management, either through a company or on a DIY basis. Many of the negative online opinions relate to debt settlement scams specifically, and not these other areas of debt relief.
Why Does Debt Relief Have a Negative Reputation?
Being in debt brings negative feelings of fear, guilt, uncertainty, embarrassment and stress. We’re usually not in the right mental state to make good decisions when we’re feeling these emotions. It’s precisely this feeling that illegitimate debt settlement companies—aka scammers—prey on. These companies promise to negotiate a considerable amount off your debt (usually an amount too good to be true) in exchange for an upfront fee. The prospective debtor, delighted to hear that most of their debt will suddenly be washed away, pays the fee—only to see their debt stay put and never hear from the “company” again.
If Scams Are Rampant, How Can So Many Debt Relief Providers Exist?
One would think that an industry with a pervasive reputation for scams wouldn’t be able to support several companies, but because of the stress big debt brings, the nation’s debt crisis and the existence of legitimate debt relief providers that have helped debtors start a new financial life, we’re left with an abundance of options.
Debt Is Stressful; Companies Help
Aside from any actual benefits debt relief companies provide through reducing an overall balance, using a debt relief company lifts a huge emotional burden as debtors are no longer on their own, faced with constant fear and uncertainty. Debt relief providers take the reins from day one, freeing debtors from constant creditor calls and working toward a lasting solution.
Debt Is a Nationwide Issue; Everybody Needs Help
According to NerdWallet, the average U.S. household carries nearly $16,000 in credit card debt. Throw in a mortgage, car payment or lingering student loan debt and things can quickly get out of hand. Debt relief is designed to reduce unsecured debt, like credit cards, and prevent a debtor from experiencing collections, lawsuits or having to declare bankruptcy.
With the amount of Americans in debt and the upfront costs of filing bankruptcy, debt relief is carving out a nice niche in giving debtors a potential way out that doesn’t involve filing for bankruptcy and completely flaking on creditors.
They’re Legitimate
A lot of companies exist in the debt relief space because there are a lot of people in debt, but also because the providers have created outcomes that they’ve advertised. If debt relief providers couldn’t settle debt, they wouldn’t be able to exist, have accreditations or garner reviews on trusted sites like the Better Business Bureau. Many debt relief companies have years of experience settling debts for thousands of debtors, lending to their ability to create a positive outcome for your financial situation.
Bad News Travels Faster, Farther, Than Good News
Like any scathing review of a cafe, restaurant or bar, companies aren’t immune to negative press and its aftermath. Consider the Freedom Debt Relief lawsuit that surfaced in late 2017 and how it pervaded the debt-relief landscape. The same is true for reviews as well. While sites like the BBB show thousands of positive FDR reviews, it’s the negative ones that stick out in most people’s minds, especially when they hear lawsuit.
Deciphering a Good Debt Relief Provider from Bad
The easiest way to avoid falling for a scam is to know the main differences between reputable debt relief providers and illegitimate scammers. For starters, a debt relief company should:
- Only charge fees after they’ve settled debt (and you’ve agreed to it)
- Be patient and informative about what the debt relief process will entail (i.e. NOT salesy)
- Not tell you to stop communicating with creditors
- Be transparent about credit damage
- Explain that debt settlement takes years not months.
Sometimes when we’re at our worst, a little bit of help goes a long way. But if something sounds too good to be true, it probably is. If you’re thinking about debt settlement as a way to absolve some of your debt, keep the above tips in mind, scour review sites and most of all—get a feel for the debt settlement provider over the phone. A lot can be gleaned by how a company educates you on the process.
Shift Frequency © 2018 – If Debt Relief Has a Bad Reputation,
Why Do So Many Providers Exist?