Not all debt mediation companies work the same way, and the wrong choice can cost you money and months of progress. Before you sign anything, ask these 10 questions. A trustworthy company will answer every one of them clearly and in writing.
1. When do you charge fees?
The answer should be: only after a debt is settled and you have made a payment under that settlement. Federal rules ban upfront fees for debt settlement services, and California law adds the same protection. Any company that wants money first is a red flag.
2. How much will the whole program cost?
Ask for the fee as a percentage and as a dollar estimate for your enrolled debt. Also ask about monthly account fees charged by the account provider.
3. Where will my money be held?
Your savings should sit in a dedicated account in your name at an insured bank, managed by an independent company. You should be able to withdraw your money at any time without penalty.
4. How long will my program take?
Expect a range, not a promise. Most programs last 12 to 48 months, depending on your debt, your monthly deposit and your creditors.
5. What happens to my credit?
An honest company tells you your score will likely drop during the program and that settled accounts can stay on your report for up to seven years.
6. What if a creditor sues me?
Ask whether the company works with attorneys and what support you get if you are served with a lawsuit while enrolled.
7. Which of my debts can you mediate?
Credit cards, medical bills, personal loans and collections are usually eligible. Mortgages, car loans and federal student loans usually are not.
8. Are you registered to work in my state?
In California, debt settlement providers must register with the Department of Financial Protection and Innovation (DFPI). Ask for the registration number and check reviews with the Better Business Bureau.
9. Can I cancel?
You should be able to cancel at any time without a penalty and get back the money in your dedicated account.
10. Who will I talk to?
Ask whether you will have a named point of contact, how often you will get updates, and whether support is available in Spanish if you need it.
Warning Signs to Walk Away From
- Guarantees to settle all of your debts or erase them quickly.
- Pressure to sign on the first call.
- Requests for payment before any debt is settled.
- No physical address, reviews or written agreement.
The FTC’s guide on how to get out of debt lists more questions to ask, including how the dedicated account works and what happens if you drop out.
How Mediator Debt Solutions Answers These Questions
We charge no upfront fees, put your plan in writing before you sign, and let you approve every settlement. See exactly how our debt mediation services work, or ask us all 10 questions on a free consultation
Frequently Asked Questions
1. How do I know if a debt mediation company is legitimate?
A legitimate company charges no fees until a debt is settled, puts all costs and risks in writing, keeps your savings in an independent account in your name, and lets you cancel at any time. Check its state registration and Better Business Bureau profile, and avoid any company that guarantees results.
2. Are debt mediation companies worth it?
They can be if you have significant unsecured debt, a real financial hardship and no realistic way to pay balances in full. You may pay less than you owe and avoid bankruptcy. The trade-offs are credit damage, possible taxes on forgiven debt and no guarantee that every creditor will settle.
3. What fees do debt mediation companies charge?
Most charge a percentage of the debt you enroll or of the amount saved, collected only after each debt is settled. An independent account provider may also charge a small monthly fee. Ask for a written estimate of the total cost before you sign any agreement.
4. Can I negotiate with creditors myself instead?
Yes. You can call creditors and ask for a hardship plan or a settlement. Many people choose a debt mediation company when they owe several creditors, are already in collections, or want a professional to manage negotiations and put every settlement in writing.
5. Is American Debt Mediators the same as Mediator Debt Solutions?
No. American Debt Mediators and Mediator Debt Solutions are separate, unaffiliated companies. Mediator Debt Solutions is based in Calabasas, California. Before working with any company, check its name, address, state registration and reviews to be sure you know exactly who you are dealing with.
