Debt Settlement USA – A Not So Glowing Review

Debt Settlement USA

Debt Settlement USA ReviewI was recently on a consultation with a consumer and she asked me to review a contract that she received from Debt Settlement USA.  She had enrolled into their program a few months ago and now she was starting to get the feeling that they were much more interested in collecting their fees from her than they were in helping her settle her debts.  After 5 months in their program she had given them around $2500 in fees and as a consequence didn’t have much money at all to even settle her smallest debt.

I told her that I had heard of Debt Settlement USA, but with over 2,000 or so Settlement Companies out there, it is easy to get them confused. I informed her that this sounded like the typical high upfront fee shenanigans that most Debt Settlement companies hook consumers into. I didn’t have a copy of their contract on hand so she faxed it over, to get my opinion.  When I received the contract, unfortunately my hunch was confirmed.

HERE ARE THE FACTS IN THE DEBT SETTLEMENT USA CONTRACT REVIEW

1.  They charge 14% of a clients total debt as a fee
2.  They charge their entire fee over the first 11 months in their program
3.  Their fee is not contingent on any sort of results
4.  If you stop making payments, they can still keep their fees, even if they haven’t settled any debt

HERE ARE JUST A FEW OF THE THINGS I FOUND ON THE WEB

1.  They have 158 consumer complaints against them at the BBB
2.  They are currently under investigation by the New York State Attorney General
3.  They paid a fine and refunded all clients in Vermont for violating the “Vermont Consumer Fraud Act”
4.  There were numerous consumer complaints found during a few google searches

Debt Settlement USA ScamHERE ARE MY THOUGHTS

The first thing that leaped off of the Contract at me was their Fees. Debt Settlement USA charges 14% of a clients total debt as a fee plus a 29 dollar administrative fee.  Now, most Debt Settlement companies charge 15% of a clients total debt, so one might conclude that Debt Settlement USA must be better. Well I guess everything is relative, I personally think both of them are way too high.

However, even if a consumer decided that 14% of their total debt was a fair fee, here is the kick in the gut.  They are going to collect that entire fee over the first 11 months into the program.  Let me say it a different way. They will collect most or likely all of their fee before they even settle the first debt.

Another thing that I saw, or rather didn’t see, was a clear explanation of the fees. Sure they told her that her fees were going to be about 500 dollars a month for 11 months but I sure didn’t see that fee totaled anywhere.  I guess if someone saw the number $5,500 in fees Upfront, they might just think twice about this program.

After crunching their numbers and double checking their fuzzy math, I actually got pissed.  Ya I was literally pissed off about the lengths that these programs will go to to trick consumers into signing up.  Let me show you what I mean.  This client had about $40,000 worth of debt. Debt Settlement USA wanted to put her on their plan where she would pay about $600 a month.  About $500 of that would go straight to them for the first 11 months. So after 11 months, the client would have paid $6,600 yet, only have $1,100 that she might be able to use to settle her debts.  How much of that $40,000 is she going to be able to settle for $1,100? Now you can start to see why I was getting angry when I was reading this.

To add insult to injury, they are misleading her and then covering their butts in the fine print.  When I use a real calculator and check their fuzzy math, the only way for this client to finish up the program in the amount of time that they estimate and still cover their fees, would be if they settle all of this client’s debt for about 34 cents on the dollar.  Hmm, according to the President of Debt Settlement USA in response to a complaint against them, he claimed that their settlements average about 43 cents on the dollar. That means, the program is probably going to last longer and definitely cost more than their rosy scenario that they are giving the client.

In fact, lets look at the fine print.  In the fine print the consumer will learn that the quoted numbers are certainly not a guarantee. (see fuzzy math problem above).  We also learn that their fees are not contingent upon any specific result. They consider the fees earned when they receive them and my favorite, if you stop making payments for any reason, Debt Settlement USA is entitled to keep everything you have given them up to that point.

I think I am starting to understand why they have been subpoenaed and are under investigation by the Attorney General in New York. I also recently read that they had to give full refunds to all of their clients in Vermont because they failed to offer a 3 day right of rescission and violated the “Vermont Consumer Fraud Act.”

They have 158 complaints with the BBB and some quick google searches for debt settlement usa scam and debt settlement usa rip off, revealed quite a bit of unhappy clients.

I don’t know the principle officers of this company or anything more about this company than what I read in their contract and I found on the web. However, from what I do know about them, I would certainly not recommend them to any consumer. Even if you discount the Attorney General investigation and all of the consumer complaints, I personally don’t feel that charging a financially struggling consumer 14% of their debt (all upfront) is at all beneficial to them.

Debt Settlement USA makes all of their money upfront.  Their fee is not based on their performance.  If their client has a financial mishap and can’t afford to complete the settlement program, they can keep their fees. Clients are not likely to settle any of their debts with creditors for over a year.  If Debt Settlement USA goes out of business or is shut down by regulators, clients will not likely get their money back.  Debt Settlement USA has no financial incentive to provide a client with support after they have paid all of their fees.

When I take all of these things into account, I see an unconscionable contract.  I see every benefit is provided to Debt Settlement USA and I do not see any consumer benefits.  Now, I am human, and I could be missing something, so if someone can explain to me how charging a consumer 14% of their debt, upfront, pushing out settlements for over a year and providing no guarantees, is in the best interests of the consumer, I would appreciate it if you would set me straight.   Until then, I must recommend that a consumer not enroll into the program currently offered by Debt Settlement USA.

What do you think of this type of fee structure?  Please share your thoughts by commenting Here

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About Damon Day

As a Debt Coach and a Financial Advocate, I have saved my clients Millions of Dollars by exposing the debt relief scams that other consumers fall victim to. I work directly for my clients, showing them who the good guys are and negotiating steep fee discounts on their behalf. Consumers who speak with me first, come out far ahead of those who don't, every single time. Guaranteed. +Damon Day

5 Responses to “Debt Settlement USA – A Not So Glowing Review”

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  1. JD (2 comments) says:

    I understand your expressed concerns regarding the “up front fee” that DSUSA charges but you don’t take into account other items involved with DSUSA. First and foremost under NO contract with DSUSA is the savings for settlements each month under $130.00 per month. Example: your total monthly deposit into YOUR OWN account equals $500 your monthly fee (for the first 11 months) could be no more than $370, and you save AT LEAST $130 in your own bank account for settlements. After 11 months is up until your settlements are paid $500 still goes into your bank account without being touched by DSUSA. ALL settlements offered at or below 70% of a clients balance is relayed to the client. THE CLIENT makes the decesion on whether or not a settlement gets paid. Thus total length of the program lies on the client. Now I will tell you since DSUSA places the resposibility of saving funds for settlement solely on the client and doesn’t escrow funds, not all clients complete the program in the estimated time frame because a lot of people aren’t serious about taking care of their debt. I have seen people enrolled in the program since 2006, paying $4-5k in fees and have settled NOTHING. DSUSA still makes a monthly call to these clients and still takes settlement offers on these clients although their estimated time in the program has LONG surpassed. I will tell you that in the DSUSA contract it does state all fees paid are non refundable, but I will assure you every request for a refund is reviewed and if the request is warranted DSUSA will refund some if not ALL of the fees paid. This company is not and has never been a company to just take your money and run. I have worked in near every department with that company and I contunie my employment becuase the company is really in business to help people out of debt not just collect their money and run. I can advise you 3 times prior to a clients “start” date with the company they are advised of the fees, the savings for settlements, and everything is an ESTIMATE. I myself have completed many programs where the savings is 70-80% of a clients ENROLLED debt amount. You don’t see DSUSA asking for more money because they saved somebody more than they estimated.

    • Damon Day (116 comments) says:

      Hello JD,
      I appreciate you coming on to share your thoughts. However I think you pretty much made my point for me. You stated that you have many clients that could not save enough money, and are still enrolled in your program long after they should have been done. They paid DSUSA all of their fees in the first year and now, for various reasons, are unable to raise the necessary funds to complete the settlement program.

      However, DSUSA will still call them every month. I certainly commend DSUSA for staying in touch with clients, however, I don’t think the clients paid DSUSA thousands of dollars for a monthly phone call. Clients are paying that kind of money because it sounds like DSUSA will be able to get them out of debt. If the client doesn’t have the ability to raise the necessary funds, do you think it is fair that DSUSA gets to keep thousands of dollars in fees for making some monthly phone calls to the client?

      Eventually clients that are unable to raise the funds will potentially be sued by a few of their creditors. At that point they will likely file for Bankruptcy. Now sometimes circumstances can arise that are unforeseen, however, I am willing to bet that a large number of these clients that are unable to raise funds, should never have been sold into a debt settlement program from the beginning.

      The problem is, if DSUSA collects all of their fees up front, then what is their incentive to tell a consumer the truth if they do not have the financial ability to likely complete the program? If DSUSA didn’t make their money until after settlements, then bringing on clients that could not raise all the money would actually be a liability and cost DSUSA money, and they therefore wouldn’t do it.

      So my point is, that the fee structure that DSUSA uses does not provide one single benefit to the consumer, and simply ensures maximum profit for DSUSA. I consider that to be an unconscionable contract. Also it puts the consumer at great risk for potential lawsuits by stretching out the overall length of the program. Finally, the consumer has no recourse if they are not happy with DSUSA’s services after the first 6 months or so. After they pay all their fees, they are stuck. They can’t quit and get a refund. They are simply at the mercy of DSUSA. What if DSUSA goes out of business? What will happen to the tens of thousands of clients that have already paid all of their fees in full, but haven’t had most of their debts settled yet?

      I did hear a rumor last week, that DSUSA is going out of business and has laid off most of its employees. Can you confirm whether or not that is true? If it is true, what will become of the thousands of current clients that have already paid all of their fees upfront and are hoping to receive services over the next few years?

      I would appreciate any insight you could share concerning those last two points.
      .-= Damon Day´s last blog ..New Era Debt Solutions Review =-.

  2. Oscar At Real Life Money Management (1 comments) says:

    I don’t know much about this. Your writings about this topic are very informative. A lot of what I have heard from other sources seems like they are just taking advantage of peoples poor financial planning in the first place. People need help but the ones who figure out how to help themselves are going to be better off in the long run. I think some of these debt settlement companies use unethical practices too. I was just always taught that if you borrow $100 and agree to pay it back with 10% interest that is exactly what you do. You do not try to get out of paying what you agreed to pay in the first place, that is just unethical.

  3. Kathy (2 comments) says:

    DebtSettlementUSA helped me get out of debt, and I could not have done it on my own. I looked into several settlement companies before choosing DSUSA. What helped me decide is that with DSUSA I kept control of my own money, and made my own decisions about when to settle. Yes, the fee was high and came up front, but I was in a debt bind and I needed help. They guided me through each settlement, and stuck with me long after their fee had been collected. Their lawyer helped me immensely with one particularly difficult creditor. Today, I am out of debt, and am better at managing my finances because of the budgeting experience I went through climbing out of debt. Perhaps a debt counselor would have helped me more cheaply, but that at the time I was investigating my options, I did not get a lot of support from them.

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