Debt Settlement History & The Method Used To Settle Debts.

The debt settlement industry has been growing over the last two decades. What used to be a mom and pop industry is now a multibillion dollar industry, with thousands of employees. The industry was not very well regulated until shortly after the turn of the century. The Federal Trade Commission was forced to take action against several but not all debt settlement companies. The infractions included the fact that some companies would hold funds of their clients, and/or just take funds from their clients, without paying out anything to the creditors. Others would inform their clients that as long as they were a client, the creditor could not pursue them for their debt. Tthis was simply not true. In fact, your creditor is obligated to utilize any remedy that is legal to collect the past due balance.

Most debt settlement companies utilize the fact that the majority of creditors will charge off your debt after one hundred and eighty days. Each creditor has a different business model; however, the majority of your creditors will charge off your debt eventually. The term charge off is the point at which the creditor writes off the account balance as a "bad debt." After that, they no longer count it on their books as an asset. You still owe the money, of course, and they will certainly make continued attempts to collect it from you. But the creditor has been forced by the rules of accounting to zero out the debt on their financial ledgers.

Once your account is charged off, the creditor will normally place your account with a collection agency at pre-negotiated rates and settlement percentages. Debt settlement companies are very aware that collection agencies are highly regulated, and they utilize this to their advantage. They will attempt to have the collection agency stop calling you with a Power of Attorney that appoints them as your agent for this debt. This only allows the debt settlement company to inform the collection agency not to contact you and sit on your money while they wait out your creditor. They will wait either until you have accumulated enough money to settle (of course after they get their signup fee and perhaps even a recurring monthly maintenance fee) or the account has been placed with as many as two or three collection agencies, or is sold to a debt purchaser.