Debt Settlement Pros and Cons. My No BS Guide to Settling Your Debt.

I’m shocked. Apparently, I’ve never written an article on the advantages and disadvantages of debt settlement and what to look for or watch for when you go to settle your debt.

If you want to talk to someone about your specific situation, I strongly recommend talking to my debt coach friend Damon Day. He is exceptionally good at helping people evaluate their overall situation and coming up with a comprehensive plan of action.

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So here goes.

The process of settling debt is age-old. It goes back to the time credit was first extended. It’s nothing new.

In fact, merchants have been settling their debts in reverse, turning outstanding accounts receivable into cash now using a process called factoring. This has been going on for ages.

Settling debt is simply the process of a debtor and creditor agreeing to resolve an outstanding debt for less than the debt’s face value. Cash in hand now is sometimes a higher value to creditors than waiting to be paid.

147200001863Read twice and referred to the Committee on the Judiciary. Reported by Mr. Trumbull without amendment, and with a recommendation that it be postponed indefinitely. A Bill Requiring the President to appoint commissioners to adjust, settle, and liquidate claims, accounts, and debts between the United States and any State, during the existing rebellion.

A very early example of how the United States government relied on debt settlement during the Civil War era.

Debt Settlement Agreement - 1936
Debtor and creditor sign adjust agreements. Alliance, Nebraska. – 1936

What is new is the abuse of overselling debt settlement for an advance fee. Some companies intentionally offered the worst customer service to collect the advance fee and then have people quit. Other companies have taken the money, offered no service, and vanished.

Debt settlement also got a terrible reputation from the way it was sold. The GetOutOfDebt.org site is chock full of older posts with secret shopper calls and documentation that were examples of not telling consumers the truth to make the sale.

Most debt settlement salespeople were/are commissioned based. Their income is dependent not on doing what is right for the consumer but on whatever it takes to close the sale.

Desperate consumers in trouble are prime targets to mislead at times like these.

How to Avoid Getting Scammed When Getting Out of Debt

Debt Settlement Pros and Cons

Advantages to Settling Your Debt

Settling debt may be an appropriate thing to do in certain specific situations. So let’s talk about when debt settlement might be a good thing to consider.

You Have Cash on Hand to Settle – If you have about 50 percent of the amount of your debt on hand to make a lump sum payment if you can agree with your creditor, then you are in a good position to jump when the offer is right.

You Don’t Have to Raid Your Retirement Funds – If you have to borrow or take a withdrawal from your retirement accounts, I generally don’t think that is a smart thing to do. There are some limited circumstances when that might make sense though.

Chapter 13 Bankruptcy – If you cannot file a chapter 7 bankruptcy, the first thing you should do is get a second opinion from a different bankruptcy attorney. The vast majority of people can file a chapter 7 bankruptcy. But if the second opinion says you must file a chapter 13 bankruptcy if you file, then in some limited situations, settling your debt might be advantageous depending on the type of debt you have.

No Tax Liability – If you are insolvent when you settle your debt, you may not have to pay any income tax on the forgiven debt. Credit counselors get this fact wrong all the time when they try to scare people about debt settlement. Using IRS Form 982 the debt is forgiven up to the point where your assets exceed your liabilities can be tax-free. You must, however, file the form with your taxes.

Your Creditor Made You an Offer to Settle – Without doing anything, creditors make debt settlement offers every single day. Some of these offers are pretty terrific and allow people to make 1-12 payments on the agreed settlement amount.

Performance Fees – Companies that are compliant with the Federal Trade Commission Telemarketing Sales Rules do not charge a fee for their services until the consumer accepts the settlement offer made by a creditor and makes the first payment. However, even if the debt settlement company you are thinking of only charges performance fees, there is still a wide range of fees charged. Be careful.

Disadvantages to Settling Your Debt

Delinquent Debt – To get to the right people at the creditors with the authority and policies to settle your debt, you typically have to demonstrate you can’t pay your debt. Most people need to be 90 to 180 days past due to get to the right department.

Collection Calls and Threats – Once you fall about 60 days past due, the collection pressure will begin to increase, which can get very intimidating. The original creditors are not bound to honor and cease and desist letter to make them stop calling you. In fact, that can often accelerate creditor action against you.

Lawsuits, Judgments, Wage Garnishments – When you default on the terms of your credit agreement, a creditor can do all of the things they laid out in the agreement you signed. This can include suing you, winning, getting a judgment against you, garnishing your wages, or levying your bank account. However, in some states where you can’t get your wages garnished, but you can still have a judgment against you.

Big Hit to Your Credit – Falling behind on your payments will be reported to the credit bureaus. That negative history will remain on your credit report for seven years. Even when you eventually settle your debt, the amount of debt forgiven as part of the settlement is often reported as “charged off to profit & loss” and is a negative item as well.

You Don’t Have the Cash on Hand to Settle – If you don’t have the cash on hand to settle and you think you can save money to settle over a long period of time, you may be in for a rude awakening as your balances increase and more fees and penalties are added. The longer it takes to settle, the more at risk of being sued you become.

See also  MJ - "I'm Ill, I've Got Bills, And I Don't Know What To Do"

Most People Are Not Successful at Settling – Most debt settlement companies have not been historically successful at settling the majority of client debt. In fact, the historic debt settlement success rates are somewhere in the 10 percent range. This does not consider the number of consumers that only had a couple of debts settled, and not all. That being said, those few companies that screen incoming clients for suitability have some excellent success rates. But this is because they turn away many people that are not good candidates for settlement. For more on this, see The Truth About The Success Rates, Failure Rates and Completion Rates of Debt Settlement Programs.

Out of Statue Debt or No Wage Garnishment Possible – I’ve seen many companies sell consumers debt settlement services when the debt was not collectible to begin with. Either the debt was outside the statute of limitations, and the consumer could not be sued, or the consumer lived in a state where wages could not be garnished.

Cost – There is a wide variation in how much debt settlement companies charge consumers. This can vary from 20 percent of the enrolled debt to 15 percent of the amount saved. When you factor in the expensive programs’ cost, the actual savings experienced can be meager. However, some do it yourself programs are very cheap. Working with a debt coach to guide you through the process can be affordable since you will do all the work.

Time – Extended payment debt settlement programs don’t make any sense to me. For those who can file a chapter 7 bankruptcy, the debt, which is about 70 percent of bankruptcy filers, is eliminated in 90 days or less. After that, the credit can be quickly rebuilt, and people can be back to being qualified for new homes or cars before a 3 to 5-year payment debt settlement program is even over.

Tax Liability – If you settle your debt, the amount of debt above when you become solvent will be taxable as income. This is an additional expense that many do not factor in when calculating how much debt settlement will cost. The forgiven debt is reported to the creditor on a 1099-C form, and you will need to report all forgiven debt on your next tax return.

Not Applicable to All Debt – Not all debt is a good match for debt settlement. Debt that is secured by collateral is typically not going to settle. Unsecured debt is the most likely debt to tackle, but depending on the individual’s debt mix, just dealing with the unsecured debt may still leave the consumer in a bind and not solve the overall problem.

Loss of Retirement Savings – Settling or repaying your debt may not be a smart move for you, financially speaking. When you are younger, you have to rob future retirement to make payments, and when you are older, you are either robbing your retirement or diverting money you need to save for retirement. Want to know how many millions of dollars a debt settlement program may cost you in future retirement savings?

Advance Fees – Attorneys think they are exempt from the Federal Trade Commission’s rules banning advance fees for debt relief services. The Telemarketing Sales Rules prohibit charging consumers to settle their debt before the debt is settled. Attorney model companies feel they are exempt. When the fee is collected in advance of settling debt, this delays the settlement of the debt. Most often, this advance fee paid is not refunded to consumers if the consumer later must file bankruptcy or changes their mind about the program. With low program success rates and advance fees paid, most consumers in these advance fee programs will statistically kiss their money goodbye.

Not All Creditors Will Settle – There is nothing that forces a creditor to accept any settlement. If only a few creditors settle and the rest don’t, then all that is happened is that some money had been spent, but no total solution has been achieved.

Performance Claims – Debt settlement companies still make claims about the effectiveness of their service that are not open and transparent. Here are some examples of what you should watch out for and call the company to task if they try to hide their actual success rates.

For more on this, see The Truth About The Success Rates, Failure Rates and Completion Rates of Debt Settlement Programs.

May I base my advertising claims on the experiences of some previous customers?

Yes, but your sample must be representative of the entire relevant population of your past customers. To accomplish this, you must, among other things, use appropriate sampling techniques, proper statistical analysis, and safeguards for reducing bias and random error. You can’t cherry-pick the most successful examples to inflate your results.

If you advertise or represent that your customers will save a certain amount of money or reduce their debt by a certain percentage – for example, “We can settle your debts for 40% to 60%” – your statements must be truthful. You must have objective proof to back them up. Your claims must accurately reflect the results you’ve achieved for previous customers. It’s important to consider the message your claims convey. Under the law, the FTC looks at claims from the point of view of reasonable consumers. Therefore, what matters isn’t the literal accuracy of the words you use but rather your proof to support the “net impression” your message conveys. For example, claiming that your past customers have achieved “up to 60% savings” is likely to convey to new customers that they, too, will get savings of around 60%. If you don’t have solid proof to back that up, the claim is deceptive.

Here are several important requirements for making sure your savings claims are truthful and not deceptive:

  1. State the savings based on the customer’s debt when they sign up for the program. You may not inflate savings figures or percentages by including interest and fees the credit card company adds after a customer signs up for your program.

    Example 8: Andy signs up with a debt relief service offered by Company H, owing $10,000 on his credit card. One year later, following negotiations with the credit card company, Company H negotiates a settlement allowing Andy to pay $6,000 to resolve the debt. However, since Andy enrolled, the credit card company has charged him interest and late fees totaling $2,000, so that Andy now owes $12,000. By getting a settlement for $6,000, Company H has saved Andy $4,000 ($10,000 minus $6,000) or 40% of the debt at the time of enrollment. It would be deceptive for Company H to claim to have saved Andy $6,000 ($12,000 minus $6,000) or 50% of his debt.

  2. Include the impact of your fees on the claimed savings. You may not inflate your savings claims by excluding the fees your customers paid you.

    Example 9: Betty owes $10,000 on her credit card and signs up with Company J’s debt relief service. Company J gets a settlement allowing Betty to pay $5,000 to resolve the debt. However, at the time of settlement, Company J charges Betty a $1,000 fee for its work. It would be deceptive for Company J to claim to have saved Betty $5,000 – or 50% of her debt – because Betty also had to pay $1,000 in fees. Instead, Company J may truthfully state Betty’s savings as $4,000 ($5,000 minus $1,000) or 40% of Betty’s debt.

  3. In calculating the results you’ve achieved over time, you must include customers who dropped out or otherwise failed to complete the program. Don’t base your savings claims only on customers who completed your program.

    Example 10: Company K had 10 customers signed up for its service. Each one had $10,000 in unpaid credit card debt for a total of $100,000. Five of the customers completed the program, and each saved $5,000 – for a total savings of $25,000. The remaining five customers dropped out of the program, each one still owing the $10,000 they owed when they signed up with the program. Taken together, Company K had saved its customers $25,000 – or 25% – of the total $100,000 debt they had when they signed up with the program. It would be deceptive for Company K to exclude the drop-outs and claim that it saved its customers 50% of their debt.

  4. Include all debts enrolled by your customers, not only those that have been settled successfully. In calculating your savings claim, you may not exclude accounts you failed to settle, even if the failure was due to customers dropping out of your service.

    Example 11: Company L has 10 customers, and each of them enrolls two $1,000 debts in the program – totaling 20 debts or $20,000. Company L can settle 10 of the 20 debts, each for $500. However, it could not settle the remaining 10 debts before those customers either completed or dropped out of the program. Thus, Company L has saved its 10 customers $5,000 or 25% of their debts in the program. It would be deceptive for Company L to exclude the 10 accounts that weren’t settled and claim a savings rate of 50%.


Credit Counselors Lie About Debt Settlement – It’s a pet peeve of mine that credit counseling groups tend to be all fear-mongering about debt settlement and not offer it. The reason creditors don’t want them to, they’d rather you make monthly payments. When a nonprofit credit counseling company tries to scare people and use it as a sales tool, it is just not cool. See Does Credit Counseling Have a Fiduciary Duty to Mention Ethical Debt Settlement to Consumers?

Debt Settlement Companies Lie About Credit Counseling and Bankruptcy – Most of the debt settlement websites I’ve reviewed here either don’t have a real clue about the other viable options to get out of debt or makes claims about them that are grossly untrue. They sell their service as a way to avoid bankruptcy when the reality is that for most people, filing bankruptcy is the most logical and financially sound step to take to recover quickly.

Use the free How to Get Out of Debt Calculator to review all your debt relief options.

The Majority of Debt Settlement Companies Close – If we look at the history of debt settlement in the 2000s, it shows that the vast majority of debt settlement companies closed up before their client’s debt was all settled. This left consumers high and dry, counting on the debt settlement company being there for the long haul.

A Whole Lot of Scam Debt Settlement Companies – Sadly, there have been many debt settlement companies that I would call scams. The best thing anyone can do before signing up with any debt relief company is to read the following fee guides.

  1. The Ultimate Consumer Guide to Checking Out a Debt Relief Company Before You Sign On the Line
  2. 10 Must Do Steps to Find the Best Credit Counseling or Debt Settlement Company for You
  3. How to Check Out a Business or Company to Avoid Getting Scammed or Ripped Off

My Honest Review About Settling Your Debt Using Debt Settlement

the truthIn the interest of disclosure, in my past days as a debt relief provider I did settle debt for some clients. We had a flat fee success guarantee. The cost per creditor was $495 and if we were unable to negotiate a mutually agreeable settlement there was no fee. Experience proved to me that for the right consumer, settlement is a real possibility.

Screening and assisting the right consumer is the key to great success. That being said, the vast majority of debt settlement companies don’t properly screen incoming clients. They typically try to sell debt settlement services to anyone with a pulse, expressed a desire, or blindly believed the sales pitch.

There is no reason why a consumer has to pay high fees to settle their debt. If a consumer under the wing of a debt coach is a client of a DIY debt settlement company and is properly ready to settle their debt, they can do it themselves very affordably.

For the subset of the small niche of the consumer pool that is perfectly targeted for debt settlement, it can be a smart thing to do. But for most people, they need to review all their debt relief options first before leaping as if it is a magical solution.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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35 thoughts on “Debt Settlement Pros and Cons. My No BS Guide to Settling Your Debt.”

  1. Steve,

    I ended up taking the advice on your site and there’s going to be an end to my living nightmare soon. I was paying 90% of my income to student loans and lost my job due to downsizing (incompetent managers who over-hired). I realized a few months before that happened that I as no longer going to be able to make payments reading your blog so I sought out assistance and started calling bankruptcy firms to see if anything at all could be done.

    Needless to say the advice was priceless because I stopped paying my loans and spent my meager savings on a lawyer instead. This year the statute of limitations will be up, I won’t be held responsible for loans that aren’t even mine, and I don’t have to deal with threats from the likes of predatory banks. The predatory lender won’t be getting another penny from me. I already paid their loans back with interest but they decided to tack on loans that aren’t mine, refused to verify the loans, and refused to let me split payments between the principal and the interest. I don’t know why the federal government refuses the same thing and denies me the ability to send a check in (I refuse to do auto payments due to the horror stories) and split my payments between the principal and interest. I also encourage people to not take out loans period for college because it’s just not worth it.

    I just wanted to thank you and to make sure you know you are making a difference.

  2. Steve,

    Good article, but…saying the majority of debt settlement companies close may be historically true but shouldn’t the effect of the 2010 rule change be considered, this statement may no longer be as relevant. Same can be said about your comment on vast numbers of debt settlement companies being scams.

    I think you need to now write articles “using the same pattern” on credit counselors, equity/consolidation lenders and bankruptcy attorneys. “All” of these providers have incentive to sell their option to the consumer over other options.Even BK attorneys collect a nice fee for each file.

    At our company if it is best we will refer our potential client based on their unique situation to a provider of another option, credit counseling, consolidation lender or a bankruptcy attorney (we are looking into a good DIY option too). Remember a referal is not always about a fee, most often it’s about a “reciprocal” referral. We do not take on every inquiry that comes our way but we try to earn something from every potential client even if it’s a referral.

    Looking forward to the next 3 articles.



    • It is an accurate historical statement and still posses a danger to consumers.

      And while there are some companies out there acting in an above board way, they still remain in the minority based on what readers submit.

      I’m sure I’ll get around to writing those guides as well.

      As far as the scam comment, I invite you to cruise through the most scam reports filed by consumers and see the most common types of debt relief companies consumers complain about. https://getoutofdebt.org/category/scam-reporter/

      I’m looking forward to you stepping out of the shadows and telling us the company you work for so everyone can take a look at your site.


      • I’ll throw a few cents in…

        Good article Steve…

        1. For the most part every situation is somewhat unique; hardship, income, assets, liabilities etc…

        2. Term settlements are very much real and available. Play your cards right and with one steady monthly contribution and a few months of savings you can settle multiple accounts paid out over time.

        3. Only a small majority of people who have successfully settled their debt (at whatever percentage) stop and think about the real savings as compared to making the minimum payments



        • Hi Buddy. I think your comment in inline with the article to have the cash on hand to negotiate settlements with all the creditors at once. This might mean saving up the money and then going for the settlement.

          Just a few minutes ago I was contacted by yet another consumer that settled some but not others and the other creditors that would not settle, sued, so they filed bankruptcy anyway.

          And yes, every situation is unique and different.

          Thanks for participating.

      • Steve I wish I could pass on our company details, I am proud of the work we are doing here but our company management has a very strict policy regarding quoting the company name in any posts that staff makes in social media and online blogs. We unfortunately are not permitted to give our company name or use our company email address in Facebook/ Twitter posts etc. or any blog comments that we participate in. I understand the need for this policy as I’m sure you do too.


        • You do realize how utterly ridiculous that is, right?

          If you want to fight for a new, better, more compliant and transparent debt settlement industry, then hiding only nullifies your message.

          What kind of message do you think that sends to regulators that read this site regularly? What it says is the debt settlement industry is so proud and forthcoming about what they do that they hide.

          You criticize me about saying companies have folded and some were scams but you are not willing to stand up and be counted?

          Bottom line – If your company believes in what they do then what do they have to be afraid of? Go get permission to be open.

          • Steve, this kind of attack from you is exactly why many companies would shy away from working with you (and there are many).

            My company is not “hiding”, they allow staff members to share our individual thoughts and opinions wherever we like, my thoughts and opinions might not be exactly as the company thinks so they say to their staff don’t join us (our company) in your posts and comments.

            Excuse me for thinking that your site welcomes the educated opinion of those who would share as you do allow anonymous comments??

            If my company management wanted to play in your sandbox as a company, they certainly would, they just don’t think it is important to do so for many reasons and also considering the way you like to tear down companies (their opinion).

            I’m sure regulators who visit your website and read reader comments understand full well what commenters are saying anonymous or not. I’m also sure that this isn’t the only online resource regulators concern themselves with.

            I didn’t “critize you” for saying companies have closed and many are scams, I just asked if you had considered how much has changed in the industry since the rule change in 2010, are you that insecure to think it was “you” personally I targeted with that comment? I accepted your response to my comment.

            You and your sidekick Damon do make it very hard to participate here in a civil conversation as every opinion from a commentor is immediately attacked as being a critizism of you and the article.

            I’ve tried to share my opinions and much of what I know is good business practice but I will find another place to do this as many before me have.

            Playing by your rules and standing up and being counted.


          • Attack? Seriously?

            If you have nothing to hide then whatever you are doing or whoever you should easily stand up and be proud of who you work for and who you represent.

            Others from the industry are not afraid to come in and comment and say who their debt relief company is. Mike Reilly from Emerge America commented on this post, said who his company is and even linked to his company in the comments. He’s not afraid.

            You accuse me of tearing down companies, and say it is the anonymous “their” opinion. So let’s deal with that. Is it your opinion I tear down companies?

            Certainly I have been critical of company behavior but if you read my posts you will see all of the facts presented are backed up with source and supporting documents.

            Every post has a button to report any error on the post. Companies have an opportunity to respond to anything they think is incorrect. So you want to make the claim or pass it on that some post is unfair, but what post. Let’s talk facts.

            You claim Damon and I make it very hard to participate but as you notice we put our real names on our comments and stand behind them.

            You and your company won’t do that. What message do you think that sends to consumers, not much has changed.

          • I agree with you Steve these anonymous commenters must have something to hide! You can control this in fact only you can control this.

            I urge you to make commenting on articles at getoutofdebt.org “for members only”…this is a function of the Disqus commenting system that you use here…change the site rules and make people prove who they are to you before being able to comment or participate in any thread on the site.

            You are right they are afraid and all hiding something and this would solve that!

            Concerned loyal reader

          • In the past I’ve made it a requirement for industry folks to state their name and provided them an opportunity to link back to their company to get a little link love through the Disqus system.

            If there was a way to make industry people be open and honest about who they are but all consumers to still post anonymously, I’d do that.

            What do you think of the idea of making that a policy of the site to require industry folks to identify themselves or be blocked? That seems to be the best of both worlds.

          • Ya, I have noticed over the years, that sales people tend to get real shifty when I bring up the fiduciary obligation/conflict of interest issue.

            They don’t really like to talk about that for some reason.

          • This is my first comment here and will likely be my last.

            IMHO Steve & Damon’s have planned tactics for diverting attention away from any commenter who questions what they are saying and/or how they say it.

            In this string for example:

            Damon says:”that would take away all the fun of watching them argue themselves into a corner.”

            He thinks it’s “fun” to try to get a commenter into an arguement with him? Very professional!

            Damon will twist something a commenter has said into “an overwhelming flaw in their business model” whereas a reader with no axe to grind will see the same statement of the commenter totally diferent. He then describes the commenter as “real shifty” if they abandon the discussion because of his aggressive tone and don’t engage further with him. Again very professional!

            IMHO Damon wins very few arguments and often looks very foolish trying.

            Steve says: “I stayed up all night waiting for answers to all the questions”

            He addresses any valid question regarding his position or comment with a barage of other questions. This repeats time after time on this website, Steve answers any question that challenges him with new questions back to the commenter.

            I drop in here from time to and I can always count on this behavior but Steve & Damon with their agressive responses to commenters do destroy continued discussion from the commenters that they should be encouraging like Melissa in this discussion, I doubt that we will see her contribute here any more and that’s a shame.

            IMHO Steve’s tactic of answering a question with a question or series of questions agressively asked doesn’t allow any discussion here to reach conclusion and I think that is what he hopes will happen.

            Kudos to you Melissa, I understand your employer’s position regarding this internet website and others like it and I get that you would like to keep your job, shame on both Steve & Damon for the way they treated you regarding your need for anonymity.

            Steve, I agree much more with what your commenters (Melissa & others) have said in these recent couple of forum threads than what you & Damon have spewed out.

            Like one posters say Steve, if you don’t want anonymous comments, change your site rules! It is that easy.

            Brent R. Martin

          • Brent,

            I don’t know why you are being snide about my comment. It wasn’t a shot but a statement. I waited up till 2AM for a response before calling it a night. After I got up this morning I checked back in and there was still no response.

            You said, “He addresses any valid question regarding his position or comment with a barage of other questions.” What question(s) are you alleging I dodged? I went back through all the comments here directed to me and I can’t find one.

            And isn’t a bit hypercritical to accuse anyone here of having a bad attitude when your IP address and other names are used for posting rude comments in the past like, “Haha—you are such an A..hole?”

            You said, “IMHO Steve’s tactic of answering a question with a question or series of questions aggressively asked doesn’t allow any discussion here to reach conclusion and I think that is what he hopes will happen.” But isn’t that how you have a discussion, otherwise you are just talking at each other without inquiry, response, and deeper investigation? See http://www.wikihow.com/Lead-a-Discussion

            In closing, I believe Damon’s point was the “overwhelming flaw in their business model” is in regards to working to gain some value out of every referral rather than put the fiduciary needs of the consumer first. It is a valid point.

            Which has the higher priority in your opinion, the needs of the consumer or the needs of the company?

          • i dont get it…melissa’s company has referral relationships with credit counselors, bk attorneys and consolidation loan lenders, they consult with the consumer and reach a concensus of the best option for the consumer and if it is not debt settlement they refer the consumer to a provider of the option they agree is best for the consumer maintaining their fuduciary duty to the consumer and sometimes earning a referral fee sometimes the promise of a referral back to them. I would bet there are a lot of times that they lose the potential client to another service without gaining any referral value too. there should be more companies that go this far…i bet there are a lot credit counselors, lenders and bk attorneys who dont

          • The issue was the statement “We do not take on every inquiry that comes our way but we try to earn something from every potential client even if it’s a referral.” And then there was the previous statement, “A potential client can be referred to another debt relief option to be better served and often a referral fee can be earned for the company, sending the client to another debt relief option need not be a lost opportunity to make money”

            The position appeared to be their mandate was not to make the most appropriate referral but to aim for an exchange of value.

            The fiduciary responsibility does not begin with the referral, it begins with the screening. For a more detailed examination of this topic, see https://getoutofdebt.org/27910/can-any-debt-relief-company-afford-to-do-the-right-thing-for-consumers

            It would be an interesting discussion with Melissa to learn more about how her company specifically screens consumers for appropriateness of incoming clients and determine the criteria for referral. She has been unwilling to share additional details about who she works for so that topic can be explored.

            “A fiduciary duty is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the “principal”): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.”

          • i dont see it that they were putting earning something from the consumer or the referral as their “top priority” over doing what is best for the consumer, everything melissa shared in all her posts seemed very honest and above board, why would she say that earning a referral was their “top priority”, she doesn’t say that anywhere, you and damon just assumed that this was the case and focused right in on that. “The position appeared to be their mandate was not to make the most appropriate referral but to aim for an exchange of value.”

            i took away from reading all her posts even the one from last year that 1. the company was doing what is best for the consumer “first” 2. as often as possible for consumers not suited for their program getting a referral benefit by having referral relationships with credit counselors, equity lenders and bk attorneys, i see them as a very smart ds company, doing the best for their potential client and maximizing their earning opportunity, how can you and damon turn this around that they are looking out for themselves first? doesn’t make any common sense in this scenario at all. they should never share their company name with you two…you dont appear to play fair from what i see.

          • Hello confused,

            I guess in the world view that you subscribe to, debt relief sales people typically don’t try and make a sale, but instead encourage the consumer to first call a credit counselor and get a quote and consider that option, then call a bankruptcy attorney and fully explore that option, then talk about the possibility of settling debt themselves, then tell the consumer about other debt settlement companies that are competitors but could be better options. Then say, after you do all that research, if you still think I am the best option then you can call me back.

            You know, doing things with the consumers best interest first.

            Meanwhile, back here on earth… That doesn’t really seem to happen very often now does it?

            Consumers are taken advantage of every single day. It is my job to point out these things. If that rubs some anonymous sales people the wrong way because it might cost them a sale, well, frankly my dear, I don’t give a damn.


          • why do you assume that everyone who disagrees with what you say is a debt relief salesperson, i am not that. let me ask you what if the debt relief consultant (salesperson) and the consumer used Steve’s incredible debt calculator together to help decide which debt relief option would be best for this consumer would you feel the consultant was trying to steer this poor (but now educated) consumer in the wrong direction just to make a sale? next question do you think that bk attorneys, credit counselors and debt consolidation loan lenders also will do what it takes to make a sale or is it just debt settlement salespeople who do this? you make your living charging people $147 each to directly hear what you have to say about the debt relief options available to them…is it good business for you to post your comments over here on Steve’s website?

          • Sure, and what if unicorns would crap lollipops? That would also be swell.

            But we both know that is not how this world works.

            Yes, bk attorneys, credit counselors, debt consolidation loan lenders, debt settlement sales people, car sales people (insert sales job here) as a whole focus, on making sales.

            This is all the more reason why it just makes good sense for a consumer to speak with someone like me before they make a major financial decision that they know little about. I can make sense out of the confusing and conflicting stories and recommendations they receive when they call different sales people, and usually tell them why most of it is wrong and unnecessarily expensive.

            Wouldn’t you agree that it is smart to get some independent advice before you enroll into a debt settlement program because the program’s sales person assured you it was the best thing you could do?

            There are of course exceptions to every rule, but in the debt relief industry, a consumer is very unlikely to find a debt settlement company that really “explains and encourages” consumers to look at other options before making a decision.

            Read my article here and you tell me what kind of advice you think any consumer that calls this company will get.

            There are some good guys out there, but they tend to be small companies and usually it is the owner of the company that is on the phone helping the client. Once you hire a typical sales person tasked with bringing clients on board, that tends to go out the window.

            Yes, it is great for my business to post comments on this site. I give consumers an alternative point of view that they do not get from all the debt relief companies wanting to sell them a specific program. Commenting here is a great platform for me to share that and let consumers know that there is someone available that gets paid to provide straight-forward, no B.S. advice.

            My clients really appreciate my service. You went to my website, did you see all of those testimonials from my clients? I must be doing something right. Wouldn’t you agree?

          • I thought my point was pretty clear.

            Debt relief sales people have a huge conflict of interest when it comes to helping consumers vs earning a paycheck.

            You stated that I win very few arguments…

            Yet, I am not aware that anyone has attempted to counter my point. So where is the argument that I supposedly lost?

      • Damon you are just being nasty and a jerk…this poor person opened up and shared her company’s way of doing things with Steve and you can’t wait to rip her apart…what is the “problem” with what she says? Wouldn’t every good business person try to earn something from every lead? She says they are happy to refer the consumer to the right service provider for them and that they have referral partners for every option available to a consumer, she didn’t say that they try to cram every potential client into their option even if it’s not the best option for the client…can you read?

        • Oh, I am pointing out an overwhelming flaw in their business model and that makes me a nasty jerk? hmm.

          You are right, that every good business person is going to try and earn something from every lead.

          So that begs the very obvious question…

          Is their objective to do what is best for the consumer, or is the focus as Melissa clearly stated, to try and earn a referral fee on every lead?

          • an overwhelming flaw? what is it? your tunnel vision is restricting your eyesight or you really can’t read. She never said a thing about earning a referral “fee” on every lead, she said that if the consumer should be using an option other than debt settlement they will refer the client to where they should be and that they have people providing the other debt relief service that they can refer the consumer to. She also said most referrals to another service “doesn’t involve a fee” but hopefully a reciprocal referral.You really should go back and read Melissa’s posts before you make yourself look even dumber.

          • Last I checked if I used these ” ” most people would understand that the words between them indicated a direct quote.

            So since your cloak of invisibility is obviously restricting your vision, let me draw your attention to… and I quote directly from Melissa…

            “but we try to earn something from every potential client even if it’s a referral.”

            I merely pointed out the flaw. That trying to earn a referral fee on each client, while being good for business, is not usually in the consumers best interest.

            For pointing out this logical conflict of interest, you anonymously come on here and call me a nasty jerk.

            Hmm… I wonder which one of us might have more credibility with a consumer trying to get straight forward information?

          • Damon might respond but I went back to look at the original comment from Melissa to check your accusation. Melissa had said, “We do not take on every inquiry that comes our way but we try to earn something from every potential client even if it’s a referral.”

            Damon said, “You are right, that every good business person is going to try and earn something from every lead.” He also said, “or is the focus as Melissa clearly stated, to try and earn a referral fee on every lead?” Which was slightly incorrect. He might have meant value instead of fee but he can address that. Effectively it is the same referral for value proposition.

            Your statement was, “She never said a thing about earning a referral “fee” on every lead,”

            Is trying to earn something from every referral, even if it is a new client or referral, still shooting for some type of value in return?

            If the goal is “try to earn something from every potential client even if it’s a referral,” then I’m interested in your opinion how that supports putting the consumer first if the implication is a referral that does not return some kind of value is not the goal.

            My background in medicine and patient care involved a lot of referrals to best treat patients. But never once was the a patient ever referred in order to get some “value” out of it. I don’t think you’d want your medical specialist doing that to you.

            The referral should be made based on best care not best value in return.

          • I just came across another comment Melissa made a year ago on this site and I will quote an excerpt…

            “A potential client can be referred to another debt relief option to be better served and often a referral fee can be earned for the company, sending the client to another debt relief option need not be a lost opportunity to make money”

            Here is the link…


            Now, I have nothing against Melissa. I don’t know her, I don’t know her company or how they operate. I am simply saying that there is a conflict of interest between a debt relief company’s need to earn a profit and a consumers need to get the best information and advice.

            And for my troubles I am called names. So do you want to keep digging this hole Mr. Anonymous Reader or would you like to quit while you are behind?

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