Debt settlement
Debt settlement fees
What the fee is based on, when it can be charged, what federal law allows, and a worked example in dollars. Plus the other costs to ask about before you sign anything with anyone.
How is the debt settlement fee set?
Our fee is a percentage of your enrolled debt, set individually, and charged only after a settlement is reached. "Enrolled debt" means the balances of the accounts you put into the program, measured when you enroll.
The percentage is set for you individually, and it is written into your enrollment agreement before you sign. Our fee is deducted only as you authorize it in your signed enrollment agreement. You see the fee for each settlement in dollars before you approve it.
We have not published a standard percentage yet. So every dollar figure on this page uses 20% of enrolled debt as a placeholder. Treat it as an illustration, not a quote2.
Ask any company to show you its fee as a percentage and in dollars, in writing, before you enroll.
What does federal law say about when a fee can be charged?
The FTC Telemarketing Sales Rule, at 16 CFR 310.4(a)(5) (eCFR, opens in a new tab), bans debt settlement companies from charging fees in advance.
In plain English, a company can collect a fee for a debt only when all three of these are true. The FTC guide for businesses (FTC, opens in a new tab) sets out the same test.
- The company has settled or changed the terms of at least one of your debts.
- You have agreed to that settlement with the creditor.
- You have made at least one payment to the creditor under that settlement.
The fee must also follow one of two formulas: a share of the total fee in proportion to the debt that settled, or a percentage of the amount you saved on it. The percentage cannot change from one debt to the next.
What does the fee look like in dollars?
Take $20,000 of enrolled debt across 4 accounts. At an illustrative fee of 20%, the whole fee is $4,000. It is not charged at once: each account carries its own share, and that share is charged only after the account settles and you make the first payment on it.
| Account | Enrolled balance | Illustrative settlement | Illustrative fee | Charged around |
|---|---|---|---|---|
| Personal loan | $3,000 | $1,350 | $600 | Month 9 |
| Medical bill | $4,000 | $1,800 | $800 | Month 15 |
| Card B | $5,400 | $2,430 | $1,080 | Month 20 |
| Card A | $7,600 | $3,420 | $1,520 | Month 25 |
| Total | $20,000 | $9,000 | $4,000 | Over 27 months |
In this example, the smallest account (Personal loan) settles first. Its fee of $600 is 20% of its $3,000 balance, and nothing is charged on the other accounts until they settle too. Settlements plus fees total $13,000, against $20,000 owed.
At the conservative end of our estimate, where creditors settle for 80% of the balance, the settlements plus the illustrative fee come to $20,000. That is no saving at all, and you should know that before you enroll.
Every number above is illustrative2. Real settlements depend on your creditors, and balances can grow while you save.
What else do you pay besides the settlement fee?
The settlement fee is the cost you hear about most, but it is not the only one. Count all of these before you decide whether settlement saves you money.
- Account fees. The company that holds your dedicated account may charge its own fees, such as a setup fee and a monthly account fee. They are separate from our fee, and the amounts are set out in the account agreement. Ask for the amounts before you enroll.
- Interest and late fees. Creditors can keep adding them to your balances until each account settles, and the FTC warns (FTC, opens in a new tab) they can put you further behind.
- Taxes. Forgiven debt may count as income, and a creditor may send you IRS Form 1099-C.
- Credit costs. The CFPB notes (CFPB, opens in a new tab) that settlement can hurt your credit scores and your ability to get credit in the future.
We explain how we are paid, and by whom, on how we make money.
What happens to fees if you leave the program?
You can leave at any time. Under the federal rule (eCFR, opens in a new tab), you can withdraw from the program without a penalty and get the money in your dedicated account back within seven business days.
The only amounts that can be kept are fees already earned, meaning fees for settlements you approved and started paying before you left.
Settlements already reached stay in place, as long as you keep up the agreed payments to those creditors. Accounts that never settled are still yours to deal with, often with more interest and late fees added.
What should you ask any debt settlement company about fees?
Ask these questions of every company you talk to, including us. A good answer is specific and comes in writing.
- Is the fee a percentage of enrolled debt, or of the amount saved? What is the exact percentage?
- Will you charge anything at all before a debt is settled and I have paid on it? If the answer is yes, walk away; the FTC calls that (FTC, opens in a new tab) a sign of a scam.
- Who holds my dedicated account, is that company independent of you, and what does it charge?
- What do I get back if I leave, and how fast?
- Does my state limit your fee, and are you licensed or registered here? Our state list is on licensing and disclosures.
If you want your own numbers, see your estimate with the fee shown as its own line. The full program is explained in our debt settlement guide.
Things you should know
The downsides, stated plainly.
Read these before you enroll anywhere, including with us. They apply to every debt settlement program.
- Your credit score will drop during the program, and late payments stay on your credit report.
- Creditors may keep collecting while you save, and they can sue. The program does not stop legal action.
- Interest and late fees can keep adding to your balances until each account settles.
- Forgiven debt may be taxable income. A creditor may send you IRS Form 1099-C.
- Fees apply. The fee is a percentage of your enrolled debt, set individually, and charged only after a settlement is reached.
- Not all creditors agree to settle, and not everyone completes the program.
- We do not guarantee any amount, percentage or timeline.
- Debt settlement is not available in all states. We are not a nonprofit or a credit counseling service, and we do not lend money.
- We do not give legal or tax advice. Talk to an attorney or a tax professional about your situation.
Notes on the figures and claims above
- 1Your credit score will drop during the program. Creditors may continue collection activity and can sue. Forgiven debt may be taxable income (IRS Form 1099-C). Fees apply. Not all creditors agree to settle. Most programs run 24 to 48 months.
- 2Figures on this site are illustrations, not offers or guarantees. Results vary; not all debts settle. Estimates assume creditors settle for 45 to 60% of enrolled balances (typical) or 80% (conservative, a 20% reduction), plus an illustrative fee of 20% of enrolled debt. The actual fee is a percentage of enrolled debt, set individually and charged only after a settlement is reached; your written agreement states it.
Do you charge anything upfront?
No. Federal law does not allow a debt settlement company to charge a fee before it settles a debt and you make a payment to that creditor. Our fee is charged only after a settlement is reached.
Is the fee a percentage of what I save?
No. Our fee is a percentage of the debt you enroll, set for you individually and written into your agreement. Some companies charge a percentage of savings instead, so compare in dollars.
Why does this page use a placeholder percentage?
Your percentage is set individually, and we have not published a standard figure. Rather than guess, we show the math with a clearly labeled placeholder and give you your real figure in writing.
Can the fee cancel out the saving?
It can take up most or all of the saving if creditors settle for a high share of the balance, or if balances grow while you save. That is why our estimate shows a conservative case and the fee as its own line.
Sources
Where the facts on this page come from. Each link opens the original in a new tab.
- 01 eCFR 16 CFR 310.4: Abusive telemarketing acts or practices (the advance-fee ban) (opens in a new tab)
- 02 FTC Debt Relief Services and the Telemarketing Sales Rule: A Guide for Business (opens in a new tab)
- 03 FTC How To Get Out of Debt (opens in a new tab)
- 04 CFPB What is a debt relief program and how do I know if I should use one? (opens in a new tab)
Next step
Ready for a clearer horizon?
Check your state, see your estimate, then decide. Nothing is signed until you say yes.
Four short steps
Your estimate first. Contact details last.
- 1How much you owea close guess is fine
- 2What kinds of debtpick all that apply
- 3Which state you live inchecked before anything else
- 4Your estimate, then a real person if you want one