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Office of Competition and Consumer Protection

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What should we pay attention to in a relationship with a debt settlement company?

< previous | next > 29.04.2021

What should we pay attention to in a relationship with a debt settlement company?
  • Before you accept the offer of a debt settlement company, you should check what type of assistance such a company offers.
  • Carefully read all the terms and conditions of the contract and make sure you know how much and for what you are paying.
  • Try to avoid getting into even worse financial trouble when attempting to escape the debt loop.
  • The Office advises what to pay attention to when concluding contracts with debt settlement companies.

In the midst of the pandemic, many people find it difficult to maintain liquidity and repay loans or credits they have taken out. On the market, many types of companies advertise their offers of assistance in reducing debts. The Office of Competition and Consumer Protection has received information about possible irregularities involving the activities of such entities. We are currently verifying them for possible violations of the collective interest of consumers.

"I always warn the consumers not to make impulsive decisions to use services of companies offering assistance in settling debts. Firstly, they should carefully study the terms and conditions of the contract, read all the documents and find information about specific services offered by the company and the amount of the fees charged. It may turn out that in an attempt to escape the debt loop, the consumer will find themselves in even worse financial trouble. It is also worth remembering that professional legal assistance is provided by municipal and district consumer advocates – in the event of a dispute with a company, we can seek their help free of charge" says Tomasz Chróstny, President of UOKiK.

What to look for before signing a contract with a company offering debt settlement services

  • OFFERS. Be cautious when dealing with offers involving assistance in reduction or restructuring your debt, facilitating its repayment, cancelling debt through a declaration of consumer bankruptcy, mediating with creditors, or removing your personal data from economic information bureaus. The companies frequently assure of their high effectiveness on websites or over the phone but charge consumers with high fees for their services without guaranteeing success. Remember that provisions of the contract apply to both parties. That is why you should always read the contract carefully – pay attention to whether its content clearly describes the scope of the company's assistance and services you are paying for. Check to see if the contract includes obligations to reduce the debt or the company claims only to make efforts to help the consumer.
  • FEES. Pay attention to whether the company requires payment even before signing the contract and assessing your financial situation and debt. If so, find out whether you will get a refund if the company refuses to accept the order. Another important issue is the type of commission – its amount and whether it consists of a one-time fee or subscription fees (e.g. payable on a monthly basis), or maybe the company additionally provides for a "success fee". The amount of fees may depend on the size of the debt the company undertakes to negotiate. Therefore, the final amount you will be required to pay to the company may be very high, and the better option will be to stay with your current repayment formula. Fees of a debt settlement company are an additional burden on your household budget, independent of the obligations arising from your existing debt.
  • SERVICES. Find out what types of services are actually provided as part of the fees charged – if they are defined generally or precisely, whether they specify, for example, the number of hours allocated for their provision or the number of letters produced, or detail any other activities. Evaluate the scope of services – whether they involve only the exchange of correspondence or are intended to result in the conclusion of settlements. In the second case, the deadline set by the company is important. Check what will happen to your contract and the fees paid if the company fails to achieve the desired result in negotiations with your creditor or does not undertake any action in this regard.
  • CONTROL. If you pay for a service, you should be able to follow the progress of its execution. Make sure the company guarantees to report on such progress and provides the opportunity to contact and verify that the service is being provided at all.
  • MUTUAL OPERATION OF CONTRACTS. Remember, you are still bound by a loan agreement and signing a contract with a debt settlement company will not cease its execution. Find out if and how the company guarantees the fulfilment of the current obligations arising from the existing debts or otherwise intends to help you repay the debt. In the first case, verify whether it actually takes place, or perhaps you are merely transferring money to the company's bank account, and the company is not forwarding it to the creditor. Keep track of repayments with your creditor. Find out how these funds will be settled if the contract is terminated. It is also important to know if the debt settlement company allows consumers to contact the creditor on their own or it reserves this option for itself.
  • TERMS AND CONDITIONS OF THE CONTRACT. Carefully read the contract (even if it is long), as well as other documents and materials containing information on how the debt settlement company works. Pay attention to the terms, conditions and deadlines for the termination of the contract by both parties and methods of settling payments in such a situation. Find out what the are consequences of terminating the contract on your part, e.g. whether the company will keep the money you paid in or impose contractual penalties. Use the Internet as a source of information – search for reviews of the company's offers. Get free help from a consumer advocate to analyse the contract terms.

Consumer assistance:

Tel. 801 440 220 or 22 290 89 16 – consumer hotline
E-mail: [SCODE]cG9yYWR5QGRsYWtvbnN1bWVudG93LnBs[ECODE]
Consumer advocates – in your town or district

Additional information for the media:

UOKiK Press Office
Pl. Powstańców Warszawy 1, 00-950 Warszawa, Poland
Phone +48 695 902 088, +48 22 55 60 246
E-mail: [SCODE]Yml1cm9wcmFzb3dlQHVva2lrLmdvdi5wbA==[ECODE]
Twitter: @UOKiKgovPL

Attached files

 

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