I was driving in my car and heard a radio ad for Credit Answers on the radio. They are a debt settlement company. What made me listen was that they said now is the time to settle debt because of the economic stimulus and due to money banks received from the government. This is obviously very untrue. Creditors my be more willing to settle now because they know people are being crushed by the economy and would rather get some money than none, but at the same time they are raising interest rates and fees.

   There are a couple other things they said in the ad that bothered me but I cannot remember the specifics. However, I figured I would follow up and check the web site.  First of all there is no mention of their fees.  Wikipedia states some charge a montly fee while others charge a percentage of the money saved through settlement with the creditor. Second, they make a weak attempt at addressing the fact that this will affect your credit for seven years;   as quoted from their FAQ, “That depends on what your credit looks like when you enrolled in our debt settlement program. But in general if you do not make payments and pay your creditors according to the terms of your agreement your credit will suffer. That is one of the trade-offs you will have to make if you are serious about reducing your debt. “  Third, When asked if they can protect you from legal action, they say, “No, but we do have strategies on helping you manage the collection efforts and can direct you to an attorney to answer any suits that may be filed.” However, on a seperate page they state, “If you attempt to work a credit card debt settlement with a creditor on your own, you will lose the protection that comes from the involvement of a professional third-party credit card debt negotiation.” Which is it?

   Now I am not saying all these companies my be using predator tactics. There are firms that probably legitamately have relationships with creditors to expidite and maxamize savings in settling debt. Do not use this as a method of consumption, meaning settling your debt and continue to create new debt.  Hopefully, their fees and having to save the full payment for settlement would discourage such behaviour.

    Things to remember, Credit Answers does not disclose their fees because they want you to call but I think any good business should be up front about their costs. Debt settlement , charge-offs, and the like will remain on your credit report for seven years. Creditors may be more will to negotiate now because of economic conditions and the uncertainty of employeement but there are not any special programs or incentives in the stimulus for helping consumers with excessive unsecured debt.

   As always, be responsible, make a budget, pay off your debt, and good luck !

Matt