Regulators at the Federal Trade Commission are expected to take action to address the debt settlement issue in the next six weeks.
Web Extra Tips to Help Eliminate Debt:
Some consumers have had success approaching their credit card companies directly and offering settlements for less than the total amount they owe.
Some banks have been approaching consumers themselves, offering settlements of up to 70 percent off the amount owed.
One less-drastic alternative is to try to negotiate with your card company to lower your interest rate and drop any fees and penalties that have accrued, rather than reducing the actual principal owed.
There's another lesser-known risk to settling your debts: The card company may report the amount forgiven to the IRS as income you have earned. You will then have to pay income tax on that amount, reducing the cash benefit of your settlement.
CLICK HERE for the Federal Trade Commission's advice on settling your credit card debt.
After this story originally aired, Web Credit Advisors contacted ABC News to comment further. The Government Accountability Office report took issue with an operator, speaking on behalf of Web Credit Advisors, who told an undercover GAO investigator, "…we help 100 percent of the people who enter this program eliminate their debt in less than 3 years." In its report, the GAO wrote. "The success rates we heard (during GAO's undercover telephone calls to debt settlement companies) are significantly higher than is suggested by evidence obtained by federal and state agencies. When these agencies have obtained documentation on debt settlement success rates, the figures have often been in the single digits." Web Credit Advisors clarified that "…100% of the people who enter, follow the guidelines and complete (emphasis added) the program are helped to settle their debt." Although, Web Credit Advisors did not disclose the portion of clients who complete its program, the GAO report also cites an industry group, TASC, The Association of Settlement Companies, as reporting that "34.4 percent of consumers participating in a debt settlement program offered by a TASC member company completed their debt settlement programs by settling at least 75 percent of their enrolled debts."
Web Credit Advisors also contends that it has been unfairly used as an example in the GAO report. A spokesperson said: "WCA is a bona-fide, reputable debt settlement company, with hundreds of satisfied clients in the short time the company has operated. Web Credit Advisors has undertaken all necessary compliance processes and is a member in good standing of IAPDA – International Association of Professional Debt Arbitrators (associate member) and USOBA – United States Organization of Bankruptcy Alternatives (associate member). We take our reputation seriously and the service we provide to customers with the utmost integrity."