Read This Before Signing
With a Debt Settlement Company

The Government Accountability Office and 43 state attorneys general documented the core problem: fewer than 10% of consumers successfully complete debt settlement programs.

Even industry-favorable data shows only 43% of enrollees settle 75% or more of their enrolled accounts. The average consumer waits 14 months before their first debt is settled—during which time creditors continue collection activities, interest accrues, and lawsuits pile up.

Debt settlement companies typically charge 15-25% of your enrolled debt. For someone with $30,000 in debt, that's $4,500 to $7,500 in fees—often for programs they never complete.

Here's something debt settlement companies don't tell you: Chase, Bank of America, Capital One, and other major creditors refuse to negotiate with debt settlement companies entirely.

This was revealed in the CFPB's investigation of Freedom Debt Relief, the nation's largest debt settlement provider. The company paid $25 million in penalties after the CFPB found they:

• Charged fees without actually settling debts
• Made customers negotiate their own settlements while charging "professional" fees
• Misled consumers about their actual negotiating power

Debt settlement companies tell you to stop paying your creditors while you build up funds in an escrow account. What they don't emphasize: 40-60% of participants face lawsuits from creditors while enrolled in these programs.

Every month you don't pay, creditors can:

• Add interest and late fees to your balance
• Report delinquencies to credit bureaus (140-160 point drop)
• Sell your debt to collectors who sue aggressively
• File lawsuits that result in wage garnishment

10 million Americans are sued for debt annually. Of those, 9 million lose by default—simply because they don't respond. The debt settlement company won't represent you in court. They're not lawyers.

In December 2024, the CFPB concluded the largest credit repair enforcement in history. Lexington Law and CreditRepair.com were ordered to pay a $2.7 billion judgment after defrauding 4.3 million consumers.

The companies collected approximately $3.1 billion through illegal advance fees and deceptive bait-and-switch advertising. The CFPB distributed $1.8 billion in consumer refunds—the largest victims relief fund in agency history.

The evidence is clear: consumers who negotiate directly with creditors achieve better outcomes than those who hire debt settlement companies.

Federal law gives you powerful tools to challenge debt collectors. The problem is, most people don't know these rights exist—or how to use them.

The documentation failure rate is staggering. FTC research found that debt buyers pay just 4 cents per dollar of face value—and sellers don't warrant accuracy. In New York, 99% of default judgment cases showed inadequate proof of debt.

When consumers challenge debts with legal representation, cases are dismissed nearly 100% of the time. Pro se defendants who simply respond achieve 70% dismissal rates in some jurisdictions. Most debt collection relies on you not responding—not on valid documentation.