The History of Debt Settlement Fees

By Charles
In July 25, 2008

Sometimes I feel like the “Lone Ranger” here at ZipDebt, shouting from the rooftops about why consumers should not pay 15% of their debt to third-party settlement companies. Regular ZipDebt readers already know my position on the front-loaded fee structure currently used by about 99% of debt settlement companies. My post from April 3, 2006 discussed some of the problems associated with the “15% upfront” model. Read More …


  1. Charles, this is a very helpful addition to the discussion of debt settlement fees. Many thanks for putting it together at a time when you have so many other irons in the fire that need tending. Although there is really nothing more that I can add to your history, I’m going to make two minor points:

    As a former FTC antitrust lawyer, I was intrigued by the rapid change in industry fee practices after a major firm announced its new fee structure an an industry conference. I’d love to know if there were back-room discussions amounting to a price fixing conspiracy.

    Also, a decade ago, I was most unhappy to see copy-cat “debt arbitrators” who tried to sound like they were lawyers, springing up in Upstate New York, after the initial media blitz by the Capoccia law firm. We had one in Schenectady headed by a fellow who later became famous for musty money stashed in his basement. The story is not relevant (except for the smell), but sure is amusing. See

  2. Charles:

    Thank you so very much for affirming my fee structure. I was concerned that my fee structure might not be in alignment with my companies mission statement. In researching, your blog has truly helped me.

  3. Hello Charles,
    Thank you for all the wonderful information about debt settlement. Currently,
    I’m looking for a good settlement company and so far talked to Statefarms
    Financial Org. (fees collected in your first 3 months), and Careone credit (15% taken off from you monthly escrow “savings” account for 18 months). I have a 38K unsecured debt and
    having a hard time coming up with a monthly payment of $1200.00. Would you
    be able to recommend a company that I can call. Thank you.

  4. Lilet, thanks for your comment. If you’re having a hard time coming
    up with your $1,200 monthly payments, then you should not be paying
    15% of your debt to a settlement company in fees! I don’t recommend any
    third-party debt settlement companies, because (assuming you are a
    good candidate for this approach) there’s no reason you can’t learn to
    do it yourself. Take some time to read the material on this site, and
    consider one of my training/coaching packages instead.

  5. there is a settlement company out there that designs their programs solely on the financial capabilites and limitations of the client. the fees are stretched out all the way out to the end of the program. There is no one size fits all program, that’s where the 40 percenters are getting kicked out of states and actually misrepresentting the financial situations of the client to their creditors. If a clients can only payback 25 cents on the dollar to their creditors, what good does a 40% industry average model program do for them, NOTHING, it outperforms their financial capabilities.

  6. Mark, thanks for your comment. I’m assuming you work for said company. I’ve always
    said that I have nothing against settlement companies per se, merely their ridiculous
    fee structure and use of obsolete tactics. I agree that a client’s financial situation
    must first be analyzed and professional fees adjusted accordingly. However, I still
    maintain that there is no reason for a well-informed consumer to hire a debt settlement
    company in the first place. Why pay fees at all when they can do it themselves? But the REAL
    problem with the settlement industry is that most companies are gunning for big volume,
    and by definition that means signing up a whole lot of consumers who are not a good fit
    for this approach. It’s actually a much narrower range of consumers who pass the
    suitability test.

  7. I couldn’t agree more. Almost all stllement companies will stick to the commission wall whatever they can. Most clients in our program just don’t want to deal with all of the burden of phone call activity and the correspondence and they also need help. Yes, anyone could do it on there own. I did many years ago myself. Most people are uneducated in the industry on the unsecured side.

  8. Dear Sir,
    I wanted to do comprehensive course on debt consolidation. I want to know some tips regarding the courses being offered for the PROFESSIONAL DEBT ARBITRATORS.
    I worked in the bank for 16 years as a credit officer and manager and during my professional life span i have done lots of consolidation of the debts to the commercial as well as Agricultural loans.
    I feel enormous potential for setting up or working in tandem with other similar debt consolidating firms.
    Please enlighten me with the valuable tips.
    Thanking you.


    Pranab Deb

  9. Pranab, thank you for your comment post. Debt consolidation and debt
    settlement are two completely different things. I have no opinion on the
    course that you are referring to, although I believe it pertains to debt
    settlement and not consolidation. Sorry, I don’t offer any training,
    programs, or services for people looking to get into the business. I feel
    there are already far too many individuals and companies operating in the
    debt industry already. And I strongly advise anyone against getting into
    debt settlement under a third-party business model, for all the reasons
    discussed on my website.

  10. Hi Charles,
    Thank you for taking the time to truly clarify the history and fee structure by the majority of the companies. Like you I believe in performing in order to get paid. Every day I am more concerned for the public.
    Having been in the debt settlement industry for nearly as long as you have, I have only seen more and more consumers get taken advantage of.
    People should truly do their homework and not only choose a company with the traditional fee structure, but also one that not paying the sales department commissions.
    We all know that in time like we are having now, it is very easy for people to say ANYTHING to earn a commission.
    Charles you are a huge asset to consumers and keep up your great work!

  11. The reason that debt settlement companies flourish is because people who are indebted for the most part are lazy. If they google how to settle debt there are numerous instruction on steps to settling debt. So blame those willing to establish a business model, employ people, pay taxes and help people who don’t desire to do something they can do for themselves.

  12. Spoken like a true debt collector — blame the consumer, as always. :-)
    Of course, the predatory practices of the banks, brutal debt collection
    methods, massively confusing and contradictory advice from “experts” would
    have nothing to do with the fear that drives people toward various rip-off
    solutions, right?

  13. Thank You Charles.
    I KNEW there was a performance-fee model out there.
    I have been in the debt settlement industry for awhile and have seen MANY “taking advantage of customers” techniques out there.
    Number one is the fee structure.
    How can we help customers if all the debt -settlement “Counselors” or in other words, “salespeople” out there are only considering their commissions? I have seen “salespeople” say that they will not help anyone who has less than a certain amount of debt before they consider on enrolling them.
    The “salespeople” do NOT service the accounts, especially for the so-called attorney based models.
    The “salespeople” are only doing INTAKE on behalf of the attorneys because attorneys are not allowed to directly solicite potential debt-settlement customers.
    We all know that negotiators and mediators do all the work. But they get paid a salary.
    Sometimes bonuses if they are able to get a certain percentage below the debt settled for less than initially claimed.
    And the idea of charging against the enrolled debt amount?
    I can’t believe that is the norm in this industry?
    I remember the days where we were taught to work for a living.
    Not try to find a way the take advantage of people, and in some instances, under the guise
    of a “recognized” name.
    I have worked for a well-recognized named company,use their very own BBB rating for the parent company and “cut and paste” their BBB rating onto the debt-relief website.

    Your model and fee structure should be the requirement for ALL debt-settlement companies.
    I will be happy when the day comes where this structure is required from every company that wants to involve themselves in the Debt-Settlement industry.

    I appreciate all your efforts and knowledge.

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