Is Debt Relief a Scam?

So, what is actually considered a scam? I think many would argue that we can call something a scam when there is no product or service received or money is simply transferred to someone unknowingly or simply lost. Whenever you pay for something but you don’t actually receive the good or service, it could technically be considered fraud or a scam. This is the simplest way to put it. If you pay for a product or accidentally send money to someone mistakenly you could also say that you got scammed.

No one likes getting scammed, but it’s a pretty strong word and a word that seems to quite overused in today's society. Popular culture has started to call everything a scam and this simply isn’t the case. Due to the overuse, we tend to dramatize what really is and isn’t a scam.

Now that we got that out of the way, let’s get to the subject at hand.

No. Most companies that offer debt relief services aren’t trying to scam you. Some industries and products just really get a bad reputation. Regardless if the service or product is good or not, there are often times, when the general public gets things wrong. For example, nobody wanted to eat lobster before it was properly marketed to the people. Lobsters are bottom feeders and they were widely viewed as dirty crustaceans. However, eventually the tide turned and the public decided they actually like lobster. In fact, not only did they like it but the general public now pays a premium to eat lobster and it is regarded as a luxury good.

Now I’m not saying, that debt relief is the lobster of the financial services industry. I’m not saying that at all. However, as a service, debt relief is quite effective at helping consumers eliminate their debt. So, it’s difficult to just say it’s a scam without taking a deeper dive.

This is just how these things tend to play out. What is bad today could be great tomorrow and what is hot today could be cold a few years from now. Regardless of your opinion, debt relief does serve a purpose in the market place and if it was an entirely useless industry it just wouldn’t exist at all. No product or service that does not add benefit to the life of a consumer can continue to last indefinitely without adding some value. Eventually bad actors get caught. Although some scams can run for a long time, over the long run consumers can tend to become quite savvy at sniffing out nonsense products and services. Especially in our digital age, consumers are known to make more of a fuss and leave a more significant digital footprint than they would otherwise. So many consumers leave reviews online now that wrongdoers are ousted much quicker than they would be otherwise. Not only that but we also have governing regulatory bodies like the CFPB and FTC.

How Effective is Debt Relief?

Overall, debt relief actually tends to be quite effective. Most consumers can end up paying down debt in a much quicker time frame with the same amount of money (often this can be 3-4 times quicker than a traditional payoff route). In terms of customers that successfully complete their debt relief program the numbers are quite high and most people that stick to making their monthly payments in a timely fashion will usually finish their program within the required time period. So, if the service tends to provide successful results we can assume that its quite effective. In relation to other options this also holds true.

How Does It Compare to Other Options?

Credit Counseling – This option is good for those who want a credit safe option. These options can tend to be trustworthy since these programs are run by non-profit agencies but they don’t save consumers much money at the end of the day, so they can also be described as ineffective.

Bankruptcy – This option is great for those who qualify but if you don’t qualify it could be hard to make this option work. Bankruptcy is not a painless option and it is the most detrimental to your credit but if you qualify it is highly effective.

So, compared to other options it is quite effective but as much as bankruptcy. However, bankruptcy has other negatives and implications associated with it.

So compared to other options, debt relief shouldn't be considered a scam because it allows consumers to get out of debt quickly, save money each and every month and it has a high success rate.

Do Debt Relief Clients Get Refunds?

Yes, customers can get refunds. If you want to cancel your program you will be refunded any remaining funds in your special purpose debt settlement dedicated banking account. You’ll simply get a refund on the remaining balance in your bank account and the money should go to same account it came from or you can also have a check sent out to you. Like with any banking account, customers can get their money back by simply telling the debt relief company to close out their account.

When you enroll in a debt relief program you should ideally have visibility into the bank account where the funds accrue. In this scenario, the safest thing you can do is to work with a company that allows you access to the third-party bank, otherwise you should probably re-consider signing up with them altogether. There are some bad actors in the industry and knowing this piece of information is a good safeguard against them. Debt relief companies are not allowed to receive payment directly from consumers, so there needs to be a third-party account that holds all monthly drafts for safekeeping.

So, it technically cannot be a scam if you are in full control of your bank account and are refunded your money whenever things go wrong.

The other options might not provide the same courtesy since they do not have designated third party trust accounts.

Best Way to Safeguard Yourself from Scams

Knowledge is always going to be the foremost way to safeguard yourself from scams. With knowledge we are allowed to be better informed and make better decisions regarding our financial situation. Knowledge protects us from scams because if we understand the general way things work we’ll be able to safeguard ourselves from misinformation and lies. If we know how payments are processed for our bills and the safeguards companies have in place to protect consumers, it’s valuable information that'll help us at the end of the day.

The elderly and other unknowledgeable/vulnerable individuals are most in need of this information, so it’s also to our benefit to share this information with them whenever possible.

All in all, debt relief is not a scam. Debt relief has saved consumers billions and has remained an effective option for people to get out of debt for years. Could there be improvements to the industry and changes for the positive, yes? However, that can also be said about many other goods and services in the modern world