Debt Articles

Why There is Nothing Inherently Wrong with Debt Settlement

Written by Steve Rhode

A recent article out of India about a business that entered a debt settlement agreement reminded me that I’ve wanted to write this article for some time.

Over the past five or so years, debt settlement has developed a nasty reputation as a scam. Unfortunately it is the debt relief bad apples that the industry did not try to stop that tarnished the debt settlement industry for debt relief providers.

Debt settlement is a perfectly fine process that can be utilized to resolve a debt when the consumer and the creditor come to a meeting of the minds about resolving the debt for less than what is owed.

Just as Kiri Industries recently did in India with Punjab National Bank, so to can a U.S. consumer do with Citibank. In fact in my nonprofit credit counseling days I successfully helped people settle their debts but charged no fee if an acceptable agreement could not be reached between the parties.

But here is why everyone in the debt relief industry bears some responsibility for the demise of debt settlement as a good tool for consumers. Because bad actors and harmful services were allowed to thrive and it naturally resulted in more and more regulation to squelch any activity that could lead to disadvantaged consumers being harmed.

Inspirational motivational quote. If you see fraud and do not say fraud you are a fraud. Simple trendy design.

The debt relief industry had a chance of protecting debt settlement and blew it.

Regulators paint with a broad brush and unless the good companies stand up to expose bad companies then all companies will suffer. And that’s exactly what happened with debt settlement regulation.

It was never the practice of debt settlement that was the problem. It was the false promises, undelivered performance, and lack of refunds that led to some companies raking in millions of dollars and leaving consumers complaining to regulators. Some individuals profited from the industry while all debt settlement companies suffered for it.

Did we learn anything from that debacle?

The lessons that should be learned by the debt relief industry will continue to not be learned on whatever the next opportunity cycle is. Right now it is student loan assistance. And again, regulators are going to crack down on fraud identified by consumers who never got exceptional and smart service. This will close down the student loan assistance marketplace.

As each permutation of debt relief service rolls out, regulators will get faster and faster in wacking that mole.

That’s just the way it’s going to be. So ask yourself, are you part of the solution or standing silently by.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

About the author

Steve Rhode

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.

Leave a Comment

Scroll to Top