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Debt Settlement Advice for Debt Settlement Companies and Consumers – Part 2 – Debt Settlement Fees

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Part 2. Debt Settlement Fees

Unlike most industries, the fees charged in the debt settlement industry, have a direct effect on the services they’re selling. I’m sure you have heard the old adage, “you pay for what you get”. Personally, I’m a firm believer in that philosophy. I’m more of quality of over quantity guy, myself. However, it is the exact opposite in the debt settlement industry.

For example, when you hire someone to mow your lawn, the price they charge has no effect on their ability to complete the job. With debt settlement, since your financial capacity is the driving force, in respect to your success, the amount you pay in fees will instantly effect you.

The most important thing for you to know, is that the more you pay in fees, the longer it will take you to settle your debts. And, the longer it takes you to settle your debts, the less likely that you will successfully do so.

There are three fee models that are used in the industry –

  • Debt Settlement Fees based on the amount of debt that you enroll
  • Debt Settlement Fees based on the amount that you save
  • DIY Debt Settlement Fees

Debt Settlement Fees based on the amount of debt that you enroll

The fee model that I’m personally not too crazy about, is the one that is based on the amount that you enroll. It doesn’t promote performance. The fee is static, no matter the outcome. This fee structure is generally the most expensive, typically 20% of what you enroll. It is the most common fee structure in the industry. Which is probably shocking, since it’s obviously the least attractive.

In my opinion, part of the reason for it being the most common, is due to the behavior that a consumer exhibits when they’re shopping for debt settlement. Consumers tend not to shop for credit card debt relief, like they would for a car, for example. I personally believe the reason for this, is due to the nature and privacy of their situation. People make it a mater of protocol to minimize their sharing of their personal information. Which, minimizes their access to other available companies and fee structures.

Due to this behavior, the companies that charge the most, participate in the most advertising, and in turn, make that advertising cost prohibitive for the companies that charge less in the industry. The end result, due to consumer behavior, and the cost of advertising, is that the consumers choices are limited. It could be argued that the debt settlement companies that don’t charge 20% of what is owed, could charge more. But, when you consider the direct effect those fees have on consumers’ chances to successfully complete the services that they’re offering, that argument becomes – “how could I ethically raise my fees when I know it will cause damage to my clients ability for success”? I don’t believe it is in anyone’s best interest to promote a situation that offers less benefit to consumers.

So, in essence, the reason this model is the most common, is it may be the only model a participant in debt settlement knows about. I personally believe that the FTC should review the fee structures in our industry. I used to think 15% of what you owe (the most common debt settlement fee prior to the advanced fee ban) was excessive. Now, it’s 20%, and in my mind, ridiculous.

Debt Settlement Fees based on the amount that you save

I’m a big fan of this fee model, as it is the one I employ at Debt Relief A La Carte. When debt settlement fees are based on the amount that is saved, consumers have the comfort of knowing that their debt settlement fee will be tied to their success. We go a step further, by guaranteeing our results, by assigning a guaranteed settlement percentage to each account that is enrolled. We must meet or exceed this guaranteed percentage in order to earn the fee for each account. By combining a debt settlement percentage based guarantee with a fee that is based on savings, we create confidence for our clients. Since they know, that we must do what we say we can do, in order to earn our fees.

We charge 15% of what we save. There are other performance based debt settlement models out there, as well. However, generally for much more. The most common performance based debt settlement fee is 30% of what is saved. I’m familiar with one other company that charges 15% of what is saved, they’re the Consumer Recovery Network. If you’re considering debt settlement, I recommend speaking with them too.

The difference between 15% of what is saved versus 20% of you owe, is mind numbing. Especially, when you consider the situation. As I alluded to earlier, the amount that is paid in debt settlement fees has a direct effect on the debt settlement services success. Let’s look at just how large that difference is…

Based on a $30,000 in enrolled debt.

DIY Debt Settlement Fees

DIY Debt Settlement is the most inexpensive option. At Debt Relief A La Carte, if we can’t find a way for a consumer to settle their debts right away, and if they can settle their debts in 30 months or less, we’ll offer to train them to settle their debts, themselves. We also give our clients the option of hiring us to settle their more challenging accounts, when their funds to settle become available.

One of the main reasons we do it this way is tied to debt settlement fees. If a consumer can’t settle their debts right away, then it is their best interest to be able to settle them as soon as possible. Again, the longer it takes a consumer to settle their debts, the less likely that they will succeed. The biggest impact that a consumer can make to their cost to settle their debts, is to minimize their debt settlement fees.

By training our DIY clients to settle their debt themselves, we create the outlet for a consumer to become properly educated and continually coached. With the option for intervention available, if it becomes necessary. This way our DIY Debt Settlement clients only pay for debt settlement fees when they have to.

Most consumers that settle their debt themselves, are pleasantly surprised by random settlement offers that are sent by their creditors, collection agencies, or collection attorneys. Most consumers that have hired a company to settle their debts one by one, would tell you that they could have settled the majority on their own. Most of our DIY clients only enroll their most challenging accounts into our credit card debt settlement service.

There is another great DIY Debt Settlement program out there that I encourage consumers to check out. It is offered by a company called Zipdebt. I have personally never met Charles from Zipdebt, but after reading his blog recently, it is beyond obvious that he not only is an expert in the field of debt settlement, but, that he is about as ethical as they come too.

Jared Strauss
Debt Relief A La Carte, Inc

See also  Debt Settlement Advice for Debt Settlement Companies and Consumers - Part 1 - On Time with Payments

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  • Jared, thank you for the ZipDebt mention. I’ve been arguing for many years that the fees are a drag on clients’ success, and that consumers are better off taking more of a direct role in settling their own accounts anyway. Kudos to you for providing honest and unvarnished advice on this subject.

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