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Real Consumer Experience With Debt Settlement Companies

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Real Consumer Experience With Debt Settlement Companies

Ministry of Consumer Services

An Ontario consumer approached a debt settlement company to help negotiate an affordable monthly payment program to settle debts of about $11,000 with his creditors. The debt settlement company said it negotiated a settlement of about $4,700 and charged the consumer a fee of about $2,500.

The company assured the consumer that all of his creditors had accepted the settlement offer. One company, however, had not accepted the settlement offer and the consumer was served with court papers. The consumer contacted the debt settlement company for instructions on what to do next and was provided with a number of forms to defend against the court action. The debt settlement company then sent the consumer an e-mail informing him they had received his cancellation notice. The consumer had never sent the debt settlement company a cancellation notice and further calls and messages to the company were not returned. The consumer's credit score was significantly damaged and the consumer approached a not-for-profit company for help.

Another consumer with total debts of $7,500 paid a total of $1,600 in fees to a debt settlement company. The debt settlement company required monthly payments of $200 to be used towards paying off her debts. From this amount, the company kept $150 in fees each month and asked the consumer to set up a separate account from which she would pay her creditors with the remaining $50. The consumer continued to receive letters from her creditors demanding payment and charging interest on the outstanding balance. Frustrated and upset, the consumer felt like she was adding more debt rather than getting help to eliminate her debt situation. The consumer subsequently approached a not-for-profit company for help.

Consumers who have questions or concerns about debt settlement companies should contact the Ministry of Consumer Services at (416) 326-8800, 1-800-889-9768 or consumer@ontario.ca.

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