How to tell whether a debt relief company is worth trusting

We are a debt resolution company, so treat this with the skepticism it deserves. It is also the piece we would most want a family member to read before signing anything, including with us.

The industry has a real problem with operators who charge for work they have not done and promise outcomes nobody can promise. Most of the ways to spot them are simple, and a couple of them are settled federal law rather than matters of opinion.

The advance fee rule

Under the Federal Trade Commission's Telemarketing Sales Rule, a debt relief company that signs you up over the phone cannot collect a fee until it has actually renegotiated or settled at least one of your debts, you have agreed to that outcome, and you have made a payment toward it.

This is the most useful single test available to you, because it is a legal requirement rather than a courtesy. If a company asks for money up front simply to enroll you, to "open your file", or as a monthly charge before anything has been settled, you have learned what you need to know and the conversation can end there.

If they want money before they have settled anything, that is not a red flag. That is the rule being broken.

Promises made before anyone has called a creditor

Whether a particular creditor will accept a particular figure depends on the creditor, the balance, how old the account is and what you can put behind an offer. None of that is known at the point of sale, which means a specific savings figure quoted in an advertisement is not a projection. It is a number chosen because it sells.

The same applies to timelines. A promise to have you clear within a set number of months is a claim about creditors nobody has spoken to yet.

What a company can honestly tell you up front is how the process works, what it costs, what it will do to your credit, and what happens if it does not go to plan. If a sales conversation covers only the upside, it is not a consultation.

Check what kind of company it actually is

Several different businesses get marketed under similar language, and they are not interchangeable.

• Debt resolution or settlement negotiates with unsecured creditors to accept less than the balance. It is what we do.
• Lenders and loan brokers give you new credit to pay off old credit. That is a different product with different economics, and a site advertising loans is not a debt resolution company however it is branded.
• Credit counseling agencies, usually nonprofit, set up management plans with creditors, typically paid in full at reduced interest.
• Credit repair disputes entries on your credit report. It cannot remove accurate information, whatever is implied.

Ask directly which one you are speaking to, and check that the answer matches what the website actually offers. A company describing itself as a debt relief service while advertising loans at a named interest rate is not being straight with you about what it is.

Ask for the paperwork before you agree to anything

You should be able to see, in writing and before you enroll, what the fee is and how it is calculated, which of your debts are being enrolled, what the monthly deposit is, where that money is held and who controls it, and what happens if you stop.

That last one matters more than people expect. Leaving a program partway through leaves accounts in worse shape than when you started, so the terms around withdrawal are worth reading properly rather than skimming.

A company that will not give you the terms until after you sign is not saving you paperwork.

Reading reviews and claims

Look for whether the numbers on a company's own site are internally consistent. Different review counts in different places on the same page, or a customer total that does not square with how long the company has existed, are signs nobody is checking what is published. Federal rules on consumer reviews and testimonials have tightened in recent years, and fabricated or unsubstantiated review claims carry real penalties.

Beyond the site itself, the Consumer Financial Protection Bureau publishes a public complaints database, and your state attorney general's office is worth a look. Neither is a verdict on its own, but a pattern is informative.

Questions worth asking on the call

• What exactly is your fee, and at what point do you charge it?
• What happens to my credit, and when?
• What happens if a creditor refuses to negotiate?
• What happens if a creditor sues me?
• What happens if I need to stop?
• Is my situation one where I would be better off doing something else?

That last question is the useful one. An honest answer sometimes sends you elsewhere, and we have written up the main alternatives in resolution, consolidation, or paying the minimum. A company that cannot name a single situation where its own product is the wrong choice is selling, not advising.

Shores Financial LLC provides debt resolution services for unsecured debt. We are not a law firm, a credit repair organization, or a lender, and we do not provide legal, tax, credit repair, or bankruptcy advice. We do not originate loans. Results vary based on individual circumstances, creditor participation, and your ability to complete a program; not all clients complete their program, and we cannot guarantee that any particular debt will be reduced by any specific amount or percentage. Using a debt resolution service may adversely affect your credit score and may result in collection activity or legal action by creditors. Services are not available in all states.