Why Won’t Credit Cards Settle With Me But Will Settle With a Debt Settlement Company?

A questions I get asked from time-to-time is “Why won’t credit cards settle with me but will settle with a debt settlement company?” Good question. And while some settlement company may proclaim it is their contacts or wonderful talent, it is often just luck.

I asked Michael Bovee of the Consumer Recovery Network to provide you with some insight into this question and to share his experience on the debt settlement process. Here is what he wanted to share.

Settlement Companies, and those who promote them, have done a fabulous job of littering the internet and the air waves with the implication that they are better positioned to obtain settlements with creditors on behalf of consumers. I emphatically disagree! Consumers are far better positioned to negotiate with their creditors and to be just as successful, and in some cases more so, than they may be prepared to believe. In fact, some creditors will categorically refuse to work with a third party, but will work directly with the consumer.

What stops the consumer from getting into the ring with their gloves on is fear and a lack of foundational facts. Get the facts and it removes the fear.

So what do firms offering to settle debts know that you don’t?

Settlement is by and large a function of math (yours and your creditors), timing, each creditor’s internal policies, and understanding the different stages of collection.

Let’s start with the math because it’s the easiest part.

Creditors know that not everyone will be able to pay their debts back. Their business model accepts this fact and they set aside a reserve for losses in anticipation of it. In the current economy, more than any time in credit granting history, those reserves for losses are being tapped, replenished, and tapped again. For a more detailed understanding read my recent article: Credit Cards & Debt Settlement – Why Banks Do It.

Creditors who see an account go unpaid and become seriously delinquent will look for ways to lose the least and the majority of them will definitely entertain a reduced pay-off.

If your creditor is telling you “NO” to a settlement, than you are more than likely off on your timing, or you had irregular account activity leading up to your default i.e. large cash advances, balance transfers, or rapid increased use of the card. It is also possible that your creditor is just flat out not going to settle and you will have to wait until it is dropped into the collection pipeline in order reach a settlement with a third party.

WARNING: If you already started working with a settlement company who sent off a limited power of attorney to your creditor, your creditor may actually refuse to speak with you! Silly and troublesome, I know, but it can, and does happen. Simply write directly to them, rescinding the power of attorney.

Timing of settlements:

If you are trying to settle with your original creditors it is generally done before the account is 6 months past due. After that, your account is subject to timing variables associated with the collection pipeline that can vary depending on who it was assigned or sold to, 30/60/90 day cycles, or if the account was placed with an attorney who has been authorized to file suit.

This is where a professional can come in handy. Not necessarily to do the settling for you, but for their knowledge and experience with the different collection stages and trends.
Internal policies:

Each creditor has their own policies that will dictate when and how much a they will settle an account for. Each creditor is different so it is unreasonable to expect your results to be similar with each of your creditors. You may save 60% with one and only 45% with another. Here to, you could benefit from working with someone who knows the day to day trends as you can be confident you did not leave money on the table by paying more than was necessary to get closure.

Roll with the punches:

Settlements are not difficult to achieve but you will need to know the little details and nuances to maximize your savings. The collection game is played by applying pressure and increasing the stress levels of the consumer who may not understand the game as well as a seasoned collection veteran. As a direct result of the financial pressures you are under, you may not know when to take a dive or when to throw your best punch. It is in your best interest to have someone in your corner coaching you through the next round.

Understand this: If you are paying high upfront fees charged by the majority of settlement firms, you may ultimately be successful, but it is going to take you much longer due to the fact that money you could have used to settle a debt is being used to pay fees. The two biggest detriments with hiring a settlement firm are related to each other; high upfront fees and long program lengths. The higher the fee you pay, leads to longer program durations, leads to higher risks of being sued, and higher balances owed. Paying these high fees is like finishing a round in the ring only to go to your corner and be smacked around by your trainers.

Consumer Recovery Network provides all of the details and tools you will need coupled with unlimited support, to assist you in settling your debts without the additional expense of 3rd party negotiation. We also guarantee that if you can’t or won’t for whatever reason, we will negotiate with your creditors and only charge for that if you accept the offers we get, and even then only after the creditor is paid. In 19 states our fee for negotiating on your behalf is never contemplated though we do encourage consumers to donate what our fee would have been to their local community via voluntary and direct donations to low income legal aid or your local food bank in the form of non perishable food items.


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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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