Daisy didn’t mean to interrupt dinner time, but she wanted to help.

“We have reviewed your credit history,” she said after apologizing for the intrusion, “and we can really help you get out from under your credit-card debt.”

I asked if her records showed a lot of money owed to American Express; of course, she assured me.

Then I asked if her debt-settlement company could actually work with Amex, which is notorious for not working with debt-settlement firms, noting that I wouldn’t want to sign up with her only to find out later that her firm actually couldn’t help.

Daisy was silent. I pressed for her to repeat the name of her firm, and to answer the Amex question.


I laughed at that recent cold call, but it also gave me pause.


My mortgage is my only debt. I don’t carry revolving debt (I use a rewards card which I pay off each month), and I have never had a personal American Express card.

But I did write the Stupid Investment of the Week for a decade, and years of being a financial columnist has taken me to countless credit-repair seminars, online credit-rebuilding sites and more, so I get calls and letters as if I was a deadbeat.

The American Express gambit was a fast proof that Daisy hadn’t ever looked at my file, but also was an easy test of whether she actually knew anything about the services she sells. She failed.

I don’t suggest people play games with cold-callers; ignore them or hang up, and make sure you are on the National Do Not Call Registry (www.donotcall.gov). [I am not, but only because goofy sales calls sometimes are relevant in my work.]

Yet plenty of people facing debt problems need help, and they fall for calls from folks like Daisy; we know that’s true because marketers would stop fishing for business if they never caught any.

Millions of Americans are behind on debts, making debt settlement and debt consolidation big business.


Debt consolidation, typically, involves using personal installment loans to pay credit-card debts and get a handle on them in one place. A TransUnion study released Oct. 30 showed that nearly 20 million consumers were carrying unsecured personal loans during the first half of 2019, a record.

That study shows that streamlining bills into one payment helps consumers, typically without creating a debt trap, where people use the credit room created by consolidation as a reason to take on more debt.

Debt settlement, however, is for when a consumer typically is past hope for consolidation, when they have fallen behind on payments and are into a cycle of late fees and escalating debt.

Debt-settlement companies use different tools to help troubled consumers get back on the right path, but the industry also has an abundant population of crooks and scoundrels.

Sadly, not all of those bad actors reveal themselves as quickly as Daisy did.

Consumers who need to go that route need to arm themselves with questions that can make them certain that relief is on the way.


Here are some things to learn:

• What are the firm’s minimum debt requirements, and do your debts qualify for help? If your debts are the result of a medical condition and are owed to a hospital or a doctor’s practice, a debt-settlement firm may not be much help. They may also want you to have certain debt levels, which is no excuse for behaving badly. Don’t sign up with any firm that can’t handle your unique situations.

• Does the firm work with your creditors? Firms like Amex, Discover, Chase and more are pretty picky about debt settlers. If a debt-settlement firm can’t work with your specific creditors, contact the creditors directly and ask about a “hardship program” that might let you avoid debt settlement altogether.

• How would the firm’s advice affect your credit-rating? If a debt-settlement firm recommends that you stop making all payments and let accounts become further delinquent, be nervous and skeptical. It may be that they can’t deal with your creditors until you are so far past due that the company dumps your debt to a collector who is willing to make a deal; it could result in a deal in the long run, but it will increase the damage done to your credit.

• How are fees determined? Debt-settlement companies typically charge between 15% and 25% of total debt. You typically can save a lot by working with a firm that charges a percentage of the amount saved by settling; this has them working to get you the best deals, because they increase their pay by getting creditors to settle for less, rather than being compensated by getting consumers to settle for anything.

• What are your rights as a consumer? The Federal Trade Commission regulates the settlement industry hard. There is a lot that settlement firms can’t promise you — like stopping all lawsuits and debt-collection communications, promising to make unsecured debts disappear and more — but you need to know upfront what recourse you have if anything goes wrong.

“Debt settlement is sold like a used car,” explains Michael Bovee, co-founder of HelloResolve.com “When you walk on a car lot, you’re not thinking the total price of the car we can afford, we’re thinking what fits into our budget and what’s the monthly payment going to be.


“Don’t gloss over the risk and ramifications of doing this, and look at all of the issues you are going to face rather than jumping at a settlement that just offers you reduced monthly payments.”

Remember, too, that you can talk to creditors, especially if you do it when issues and troubles first arise and before those problems fester.

Pick up the phone and cold-call your creditors, asking after hardship programs and trying to come up with solutions. They will treat you better on that call than they will if you let overdue debts become problems that wind up in calls from debt collectors or someone like Daisy.