Are Debt Relief Companies Legitimate?

Are Debt Relief Companies Legitimate

Debt relief is big business, and most debt relief companies are total scams. They won’t help you. In fact, if you tangle with a debt relief company you will end up with less money than when you started because they demand a hefty upfront fee. And, you’ll still be in debt, because debt relief companies do not do anything.

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Are Debt Relief Companies Legitimate?

In most cases, a so-called debt relief company is nothing more than a shell company taking your money or collecting your debt for another company.  At best, they are just another loan company that will put you deeper in debt.

Anything a debt relief company claims it can do for you, you can do for yourself. At the bottom of this article, I show you where to learn what you need to know.

If you read a glowing review of a debt relief company online, it’s because the reviewer will make a large commission if they get you to sign up. They are not your friend.

Debt Reducing Traps.

Debt relief companies have only two tools, loaning you more money and offering to negotiate with your creditors. Both are traps.

Borrowing money to pay off debts will not help you. It is even worse if you must borrow at a higher interest rate, which is often the case with debt relief companies.

The truth is, once you pay the debt relief company their fee, they don’t have to do anything for you. Don’t expect them to negotiate with your creditors, because they probably won’t.

Most people who work at debt relief companies know very little about financial management. They are just there to talk you into paying the up-front fee. If you pay them, you’ll be paying good money for a whole lot of nothing.

Relief Companies Are Proven Scams.

Debt relief scams are common. A month rarely passes that a news organization, consumer advocacy group or government agency does not report on yet another fraudulent debt relief company.

When a consumer advocate exposes a debt relief scam, there is a typical pattern of complaints. For example, usually, the debt relief company made wild and exaggerated claims about what they can do for the client and lies about their rate of success.

Consider anything a debt relief company claims to be nothing more than their attempt to talk you into paying the upfront fee.

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Typical Debt Relief Company Pitch

Are Debt Relief Companies Legitimate II

Below, I discuss in general terms a case that was prosecuted by the Federal Trade Commission against a well-known online debt relief company.

Incidentally, although this company is a blatant scam, it has an A+ rating with the Better Business Bureau. In the past, the BBB has been caught charging money for their ratings, so you really can’t trust them.

Here’s what happened to a customer:

A debt relief company promised a client that if she paid the upfront fee of $999, they would negotiate a lower interest rate on her credit cards, her mortgage and auto loan. The company promised that she would be able to pay off the loans much faster and soon be debt free. Also, the company promised that with their help, the woman would save more than $2,500 in the first month.

The woman paid the $999, and the debt relief company did nothing. The woman suffered greater debt and a devastated credit score.

The lesson here is don’t expect a debt relief company to do anything for you.

The Government Approval Pitch.

Many debt relief companies, particularly those you find online, claim to be part of a government debt relief program or approved by the government. This is a lie.

It is not unusual for debt relief companies to pretend to be government agencies or to work on behalf of a government agency. The “U.S National Debt Relief Plan” is an example of a total scam that pretends to be part of the government.

A Web of Deception.

Debt relief is hugely profitable. Every year, hundreds of debt relief and debt consolidation companies set up shop on the internet. Tens of thousands of affiliates sing the praises of these fraudulent businesses to earn a generous commission. Commissions of $300 per referral are typical. Don’t get caught in their web of deception.

Are Debt Relief Companies Legitimate NFCC

Beware of the National Foundation for Credit Counseling.

If an agency offers you free debt management help, there’s a catch.

The National Foundation for Credit Counseling presents itself as a non-profit service to help consumers. However, in reality, the NFCC works for credit companies. The NFCC is a debt collection agency. They are NOT your friend.

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How to Get Out of Debt on Your Own.

All you need to get out of debt is a little discipline and income. See the book I recommend at the bottom of this article.

You can get out of debt with a low income, but you will need to reduce your monthly expenses, so there is something left over at the end of the month to pay the bills.

Start with a budget. Sometimes the most expensive monthly costs are the non-essential ones like entertainment and eating away from home. Cooking at home and cooking from scratch will save a bundle that can be used to pay off debts.

Also, negotiate better terms with your creditors. It’s easier than you might think to get better terms.

Almost Free Debt Management Help.

I highly recommend the book Credit Repair: Make a Plan, Improve Your Credit, Avoid Scams, written by Amy Loftsgordon and published by NOLO. It costs about $25 on Amazon and it is well worth it.

Amy Loftsgordon is a lawyer and NOLO has spent decades helping the average Joe understand the law and how to manage legal situations on his own.

You can get out of debt and you can do it yourself without spending a bunch of money with a bogus debt relief company. Get the book and stop worrying about your debts.

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10 thoughts on “Are Debt Relief Companies Legitimate?

  1. Great article. It is amazing how many people are in so much debt, they have virtually dug a hole for themselves.

    Debt relief companies are like preditors preying on the weak. Like you say the only way out eventually is to downscale on your living expenses and luxuries and to pay back as much as you can every month.

    I am lucky enough to have never found myself in this situation, as I believe in paying for everything in cash, but it must be a very depressing situation to be in.

    1. Hi, Michel!

      Thanks for commenting. Good for you for avoiding debt and paying in cash. That is how I was raised. My parents lived through the Great Depression.

      I grew up in a military town in the 50s & 60’s. I remember pawn shop owners getting arrested for loan sharking for charging 12%. In the day, that was outrageous. It was also a time when prudent money management meant staying out of debt and saving at least 10% of your paycheck.

      By the 1980s interest rates were through the roof. Credit card companies were charging more than 18% and we were encouraged to borrow as much as possible. Payday loan companies charge an obscene amount of interest. Even student loans are criminal, imposing arbitrary penalties and charging interest on the penalties.

      It’s heartbreaking to watch loan companies prey on the people who are most vulnerable and struggling the most. Then to see so-called debt relief companies swoop in like vultures to pick the bones.

      I’m disappointed our elected officials have not protected us from these monsters.

      Thanks for stopping by,


  2. I would agree that learning to do it yourself is a much better option than most debt relief companies. Most lenders or creditors are more than willing to work with you if you let them. Furthermore, and what most don’t say, is that many creditors view debt relief companies to the same realm as bankruptcy thus actually hurting you rather than helping you. Very informative post. Thanks.

    1. Hi, Jason!

      Thanks for stopping by.

      I appreciate your insight into the debt relief companies and how they might hurt someone’s credit rating.

      All the best,


  3. Hello Gary, this article/post was actually so much more informative than i thought it would be! There are a lot of great tips I never would of thought of to begin with. Thank you so much for putting a lot of effort into this. You obviously care about helping people not get scammed

  4. I think your approach to credit repair is so true. There are thousands of places out there that want nothing more than to take you money and leave you with empty promises and an empty wallet. The links you have to get started on Wealthy Affiliate are nice and definitely tie in with everything you have written as well. Awesome job!

    1. Hi, Linds!

      Thanks for taking the time to comment.

      When I was a kid debt relief companies were called loan sharks. Unfortunately, most of the credit industry are loan sharks now. It’s the new normal.

      What I find heartbreaking is that people need help with their debts, but if they turn to the so-called credit relief companies they will only make their situation worse.

      People have to get out of debt by themselves. The book Credit Repair shows how.

      Also, as you mention, anyone who can use a computer can make money online when they are shown the right way to do it. Wealthy Affiliate is the only place I recommend. It’s where I learned and it’s where I help people every day to make money.

      Thanks for stopping by,


  5. Thanks so much for sharing this book on debt relief. I too have seen so many advertisements all over the web about debt relief companies and have thought the same thing – we could all do this ourselves if we just knew who to contact and what to say.

    I think your way sounds like the smart way – to learn to do your own credit repair and for a very low price. There are far too many companies out there that are ripping people off. Thanks for helping teach people how to avoid them.

    1. Hi, Debbie!

      Thanks for stopping by. The truth is nobody cares about your finances more than you do. It’s appalling that these debt relief companies are preying on the very people who can least afford to be ripped off.

      Getting out of debt is a process of re-negotiating with creditors, budgeting and paying off the debts. There isn’t an easy way and paying a debt relief company money will only make the situation worse. The book Credit Repair, which I mention at the bottom of my article, is the best option and includes letters to send to creditors.

      As painful as debt can be, digging out of debt is a learning experience with many intangible rewards. I’ve seen families pull together as a team to pay off debt and I’ve seen people rise out of debt to become wealthy. Getting out of debt is a great way to learn money management.

      All the best,


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