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Settlements with credit card companies

In most cases, credit card companies will negotiate with consumers on past-due amounts to come to a settlement agreement. Some companies advertise services to do this for the consumer, and they can help in some cases. It is important to watch for scams, though, because many companies may attempt to take advantage of consumers or lure them in with false information, such as advertisements to settle debts for pennies on the dollar or guarantees that they will make unsecured debts go away. Some even claim to use a "new government program" to do all of this.

Before working with a debt settlement company, consumers should check with the local consumer protection agency and the state attorney general to find any complaints against the firm. Some states also require licensing, and the attorney general could provide the information regarding the state's laws and whether the company has a license. Consumers can also do an Internet search with the company's name for additional information about complaints that have been lodged.

Many of these companies charge fees for their services, and some ask the consumer to stop making any payments to the credit card company without explaining the serious consequences of this. Consumers should avoid firms that do this because it suggests that the company may use deceptive practices.

Working with a company to settle credit card debt can be a great alternative to bankruptcy for some people, but it is possible for the consumer to achieve the same results without the agency. An attorney may be able to help the consumer negotiate with creditors to settle debts or reduce interest, fees and payments on them to make them more manageable, and this may be much more affordable and effective than a debt settlement agency's services.

Source: Federal Trade Commission, "Settling credit card debt", October 29, 2014

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  • NACA | National Association of Consumer Advocates
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