Debt Settlement Services

What You Need to Know

Debt settlement agencies offer to help you settle all of your credit card debt, as well as other unsecured debt, with claims of up to 70 percent savings on the total amount of money you owe. These companies are known for:

• High-pressure sales tactics.
• Charging large up-front fees before any action is taken.
• Describing their services in hard-to-understand contracts.
• Providing misleading information about the impact on your credit report and credit score.
• Making false claims that debt settlement companies are somehow linked to the government.

This process can create a high degree of risk for consumers, who are open to abuse by companies interested in only collecting up-front fees while leaving consumers to deal with disgruntled creditors, most of whom are not interested in waiting years to accept a pennies-on-the-dollar settlement.

You Are Protected

For example, in Ontario The Stronger Protection for Ontario Consumers Act creates new standards of conduct for debt settlement agencies by:

• Banning up-front fees. Payment of fees before services are provided has been prohibited.
• Placing limits on the amount of fees that can be charged to consumers.
• Requiring clear and detailed contracts with specific information. For example, the effect of the debt settlement on the consumer's credit report and score must be disclosed.
• Establishing a 10-day cooling-off period, which gives consumers more time to consider their options and how the agreement will affect them.
• Allowing the business licenses of non-compliant companies be revoked.