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GAO: Complaints about debt settlement valid
By Sam Craine on Apr 24th, 2010
Count the Government Accountability Office among government agencies and officials that are warning consumers against debt settlement companies.
In a recent report, GAO representatives posed as consumers and contacted debt settlement companies to gain access to their offers. The office did this to investigate claims that these firms often ask for up-front fees while neglecting to provide services.
"GAO found the experiences of its fictitious consumers to be consistent with widespread complaints and charges made by federal and state investigators on behalf of real consumers against debt settlement companies engaged in fraudulent, abusive, or deceptive practices," the office's report said.
Debt settlement companies often work by collecting money from a consumers that would have gone to pay their monthly credit card statement. Consumers are advised to stop paying, and the funds are used to create a lump sum that will be used to negotiate with lenders.
Along with the chance of experiencing fraud, consumers should realize that even successful debt settlement programs will still hurt their credit score, which can make it more difficult to gain access to loans.
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