Fast Facts--Debt Settlement

  • Over a half million Americans are in debt settlement programs today.1
  • Last year, the Federal Trade Commission ruled that debt settlement companies cannot collect any fees until after settling at least some debt for the consumer. If a debt settlement company asks you to pay up front, you should probably go elsewhere.
  • Very few consumers receive what they are promised—the elimination of their debt:
    • A survey of debt settlement companies revealed that 34.4 percent of enrollees had 75 percent or more of their debt settled within three years.2
    • Data released by the Colorado Attorney General showed that only 11.35 percent of consumers who had enrolled more than three years earlier had all of their debt settled.3
    • When asked to show that most of their customers are better off after debt settlement, industry leaders said that would be an ‘unrealistic measure.’ In other words, debt settlers cannot even say they can help at least half of their clients settle their debt and save more money than they pay in fees.4
  • Stopping payments to creditors as part of a debt settlement plan can reduce a consumer’s credit score from 65 and 125 points, with higher impacts on consumers who were current on their payments prior to enrolling in the program.5
  • Missed payments can remain on a consumer’s credit report for seven years even after a debt is settled.6
  • Many consumers who enroll in debt settlement programs, whether because of it or in spite of it, end up having to file for bankruptcy, with estimates ranging from between 13.5 percent and almost 25 percent of enrollees filing bankruptcy.7



1 Reported by Andrew Housser, American Fair Credit Council in iwatchnews, The Center for Public Integrity.
2 Letter from the Association of Settlement Companies (TASC) to the Federal Trade Commission, commenting on the FTC's proposed amendments to the Telemarketing Sales Rule on the marketing of debt relief services at 9-11 (Oct. 26, 2009), available at See Richard A. Briesch, Economic Factors and the Debt Management Industry (Aug. 6, 2009), available at:
3 See “Press Release: Attorney General Unveils First Annual Report On Debt Settlement, Credit Counseling Business Practices,” available at; 2009 Annual Report – Colorado Debt Management Service Providers, available at
4 U.S. Gov’t Accountability Office Rep. No. GAO-10-593T, Debt Settlement: Fraudulent, Abusive, and Deceptive Practices Pose Risk to Consumers (Apr. 22, 2010) (emphasis added) [hereinafter “GAO Report”], available at
5 GAO Report at 10, 14.
6 Id.
7 A report by Richard A. Briesch, issued by Americans for Consumer Credit Choice, a membership group made up of those in the consumer finance industry, found that, of the approximately 60% of consumers who cancelled their plans before completion, at least 13.5% of them cancelled due to forced bankruptcy. Richard A. Briesch, Economic Factors and the Debt Management Industry at 15-16 (Aug. 6, 2009), available at