Credit Card Debt Settlement Programs: Legitimate?

One of the most common forms of debt in the United States is credit card debt. There are a wide range of credit card debt settlement programs advertised in print, on television and on the internet. Knowing which of these programs is legitimate and which are not providing anything for the fees they charge is a concern for consumers.

How do Credit Card Debt Settlement Programs Actually Operate?

Credit card debt settlement programs are designed to have an intermediary, the debt settlement company, negotiate directly with the credit card company to decrease the amount of the debt, establish a workable repayment plan, and to get the interest rates decreased during the time of the repayment.

However, during this time the debt settlement company also charges you fees for providing these services, often before the final settlement has been completed. The fees may be a flat rate or they may be a percentage of the original debt amount. Since consumers are paying the debt settlement company there is less cash on hand to pay directly to the creditors.

Lack of Legal Knowledge

Debt settlement companies are not attorneys, nor are they able to provide any type of legal advice or representation should a lawsuit arise out of the debt. Most people working at these companies are not financial professionals nor do they have any mandatory training or credentialing. In many cases consumers are given inaccurate information about the risks involved in credit card debt settlement programs. One big risk is that the creditor can start a lawsuit even if the debt settlement company is in negotiation.

Time for Negotiation

The debt settlement company banks on their relationship with the credit card companies to negotiate a settlement that matches the consumer's budget. However, often the negotiation process itself takes months or even years, during which time the interest continues and the debt increases. In addition the consumer continues to pay the company for their efforts, without having any break in their credit card debt. If the credit card debt settlement program isn't able to negotiate a deal there is no refund of the fees paid to the consumer.

A Better Alternative

Individuals that find themselves in credit card debt have alternatives to working through the mass marketed credit card debt settlement programs that often are not legitimately providing assistance. Contacting a debt reduction attorney is highly recommended as these professionals can provide legal advice and information as well as work directly with your creditors to facilitate the repayment of the debt.

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