Unfortunately this is going to be an all too common headline in the coming months. With Debt Settlement companies ripping off consumers at an alarming rate, the FTC and state regulatory bodies are taking notice and stepping up enforcement. Debt Relief USA recently filed for bankruptcy citing several investigations by state attorney generals and federal authorities as the reason for closing their doors and filing bankruptcy.
Why were they being investigated? Because they were doing what most debt settlement companies are doing. Ripping off consumers! Charging large fees upfront, stretching out client programs for 4 years, misleading consumers, getting them sued and not providing the promised services among other things.
So this is great news for future consumers that will not be able to fall victim to Debt Relief USA. What about their current clients? Well unfortunately they got screwed. In a letter from the Texas Attorney General sent to each current and former client of Debt Relief USA he states:
“IF YOU ARE A CURRENT DEBT RELIEF USA CUSTOMER (the company was holding your “set-aside” funds in order to settle your debts): The Texas Attorney General is working with the Chapter 7 Trustee to ask the Bankruptcy Court to refund your “set-aside” funds to you as fully as possible. Because of the limited funds in the estate, it is unlikely that you will receive a refund of any fees that were paid to the company“.
You can read the actual letter here
If you just paid a debt settlement company 5 or 10 thousand dollars in fees, how would it feel to get a letter like that in the mail?
If you are a victim of this company what can you do about getting your money back? Nothing. You can’t do a single thing but wait and hope that when the bankruptcy attorneys are finished taking all of the money out of the company, there will be a little left to refund consumers. I hate to be pessimistic here, but speaking from personal experience, there is almost never any money left for consumers. The case will stay tied up in bankruptcy court until there is no money left to fight over.
Bryan Fears, a Texas Bankruptcy Attorney says:
Debt settlement is big business, but many debt settlement companies have caused big trouble for their clients. Bankruptcy attorneys regularly see the damage caused by debt settlement companies. In some cases money is not returned to debt settlement customers, or the company itself files bankruptcy, or the individual’s credit is destroyed.
If you are thinking of hiring a debt settlement company to help you with your debts, how can you protect yourself against a company collecting all of their fees from you and then going out of business? Simple.
DON’T ENROLL INTO A DEBT SETTLEMENT PROGRAM THAT CHARGES ALL OF THEIR FEES BEFORE SETTLING ALL OF YOUR DEBT!
I can’t possibly make that any clearer. I don’t care what the “super helpful” sales person does to wow you about being a member of TASC or USOBA, or how large they are, or what great settlements they get or whatever magic trick they use to get you to not look at the fact that they charge all of their fees before performing your service.
Any company that demands to get paid all of their fees before you can approve of their work, is the largest Red Flag in the history of Red Flags. Don’t do it. If they don’t tie their fees to their actual performance, that tells me they don’t have much confidence in their ability to provide you with a successful outcome. That is why they want to collect all of their fees as quickly is possible. Well if they don’t have confidence in their own ability, should you?
What do you think about how most of these debt settlement programs charge clients their fees upfront without any guarantee of a positive outcome? Please share your thoughts HERE
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