The past few years have seen a rise in the popularity of settlement companies.
In fact during the most crippling economic recession that the country has ever faced, settlement was the only industry that actually flourished.
As with any new industry, in the beginning this market was not regulated and caused a lot of debtors to be cheated by fraudulent settlement companies.
These companies were charging very high amounts as fees.
In fact they would charge the debtors a flat commission for their services and demand this commission before rendering their services.
The result was that many debtors already burdened by huge debts were cheated of their money.
These companies would collect fees from a number of debtors and disappear or simply refuse to negotiate with the creditors.
As a result of this many debtors were scared of hiring settlement companies and tried to negotiate with the debtors themselves.
However negotiating debts with several creditors simultaneously can be quite a tedious process.
At the same time, most debtors do not have complete knowledge of their rights as consumers and end up getting shoddy settlement deals.
A professional debt settlement company on the other hand is well aware of all laws pertaining to debt settlement and the debtors' rights and hence can get a better deal.
Moreover, the creditors also prefer to deal with a professional company rather than dealing with a stressed and confused individual.
In order to regulate the settlement market and to prevent debtors from getting cheated the federal government decreed that no company could charge more than 15% of the amount that they saved for the debtor.
This amount too was payable only after the settlement agreement was signed with the creditors.
This is the reason that most fraudulent companies who were charging flat commissions from the debtors, had to wind up business.
Only legitimate settlement companies remained in the market.
This arrangement was beneficial to all concerned.
The creditors could settle a number of accounts at one go, the debtors were able to avoid the stressful negotiation process and the legitimate debt settlement companies got more business as the fraudulent companies went out of business.