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Nov 252011

U.S. debt settlement companies – be wary and do your research 

Canadians have a dizzying array of debt help options such as non-for-profit credit counsellors, debt management consultants as well as licensed Trustees in Bankruptcy and proposal administrators, such as BDO. Adding to the confusion, , a number of U.S. debt settlement companies have recently started operating in Canada and aggressively marketing their debt settlement solutions. 

Their marketing tactics are slick, such as online ads, radio commercials, television spots, telemarketing (leaving voice mails on your home phone) and direct mail campaigns made to look like official government documents such as this one:

Debt Settlement Company Marketing Tactic.PDFDebt Settlement Company Marketing Tactic.PDF

We also continue to hear alarming things in the media and from people who come to see us after being taken advantage of by one of these 'for profit' debt settlement companies. If you are thinking of speaking to a company that offers debt settlements, we recommend doing  background research and comparing a few options to help you make an informed decision.

The U.S. Federal Trade Commission and U.S. Government Accountability Office warns consumers to be wary of these debt settlement companies and found that in the America:

  • The success rate of for-profit debt settlement companies is less than 10%
  • 65% of people who pay fees leave their programs without ever receiving a settlement
  • The vast majority of people who deal with these companies do not save any money and are often left worse off in the end.

For more insight, check out this article about other Canadians’ negative experiences with U.S. debt settlement companies.

Things to consider when talking to a debt settlement company:

  • What type of reputation do they have? Check the Canadian Better Business Bureau and the American Better Business Bureau for information about any complaints.
  • Does the company have relationships with Canadian creditors? Do they know which creditors will work with a debt settlement plan and which ones wont?
  • Is the debt settlement company licensed and bonded in Canada? Do they have offices in Canada?
  • How does the company settle your debt? What is their process for negotiating with creditors? 
  • Do they disclose all of the implications of using a debt settlement program to eliminate debt such as the possible threat of legal action, the effect of debt settlement on your credit rating and whether it will stop collection agencies from harassing you?
  • How does the debt management company charge its fees?  Do they charge them up front, on a monthly basis or when the work is complete? 
  • What are your options for cancelling your contract/agreement and what are the penalties for cancellation?

Why get debt advice from a trustee in bankruptcy vs. a U.S. debt settlement company?

If you are looking for debt help, of course we encourage you to talk to a BDO professional who will review your situation and outline all of your options. We offer a complimentary, confidential consultation and there is no pressure or obligation to make a decision.  

As government licensed professionals operating within the rules of our profession, BDO offers a level of professionalism and transparency that U.S. debt settlement companies and many of our competitors don’t.   BDO offers debt consolidation through a consumer proposal to help you renegotiate the amount you owe as well as the length of time to pay it back. We also offer a fresh start through bankruptcy.  We will carefully explain how we earn our fees (fee tariff is set by the government) and outline the steps involved. We'll also explain all of the benefits and implications of making a consumer proposal or filing for bankruptcy so you can make an informed decision.  Contact a BDO debt help professional near you and take control of your debt today.​

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BDO Canada Limited is an affiliate of BDO Canada LLP. BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
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