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Be wary of debt settlement companies that charge upfront fees
By Peggy Stillwell on Apr 12th, 2010
Consumers may have seen advertisements on television for debt settlement services, which claim they can reduce the amount people owe on their credit cards.
Although some of these firms may be able to deliver on their promises, others may not, which may leave consumers in worse shape than when they started. Financial columnist Terry Savage, recently wrote in the Chicago Sun-Times that these firms may collect upfront fees while never actually reaching a settlement with a consumer's creditors.
"Those upfront fees can frequently amount to as much as 17 percent of the consumer's total outstanding debt," Savage wrote.
The columnist said Lisa Madigan, the attorney general for Illinois, has filed suit against a number of debt settlement companies that used these tactics. In fact, Madigan recently announced she has crafted legislation that would further regulate the industry in the state.
Through Madigan's bill, debt settlement companies would not be allowed to charge upfront fees and would also have to register with the state to conduct business.
Madigan isn't alone, as officials in other states like North Carolina and Montana have warned their citizens about debt settlement companies that charge upfront fees only to fail in the services they claim they can provide.
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