The advertised fee is only the headline. Here is every line of the bill, in order, including the two nobody says out loud on the sales call.
The one fee the law controls is the settlement fee itself. Under the FTC's Telemarketing Sales Rule, a company cannot collect that fee before it settles a debt and you pay on the settlement. Published ranges commonly run 15-25% of enrolled debt. Four other costs face no such ceiling. First, the bank holding your dedicated savings account typically charges around $9-$10 to set up and about $10 a month, for the full 24 to 48 months. Second, your creditors charge late fees of roughly $40 a miss, and penalty rates near 29% run up your balances while you save. Third, the IRS may tax the forgiven amount on a 1099-C. Fourth, some firms charge a $50-$200 fee if you quit. The sales call mentions the first. Ask about the other four.
Say you enroll $15,000 and the firm settles accounts around 50 cents on the dollar. The advertised fee: 15-25% of $15,000 is $2,250-$3,750, collected only after settlements you approve. Now the unlabeled lines. Bank account: about $9-$10 setup plus roughly $10 a month for about 30 months, so around $310. Late fees: four accounts, a couple of intentional misses each at roughly $40, call it $320. Penalty interest near 29% inflates some balances before settlement, shrinking real savings. Then the April surprise: if about $7,500 is forgiven and you are not insolvent, it can count as income, and at a 22% rate that is roughly $1,650 in tax. Headline: $2,250-$3,750. All-in: closer to $4,500-$6,000. Your numbers, state, and tax situation will differ.
Two people can get different quotes from the same company, legally, because states sit on top of federal law. Some states cap the percentage below 25%. Some cap the fee per settled account, or the dollar total you can ever be charged. Some require a license and a surety bond before a firm may even solicit you. A few effectively bar the settlement business, and a company licensed next door cannot operate there. So your zip code really is a price. Two checks before you sign: look up your state's cap in our fee-caps-by-state data table, and confirm the firm's license number with your state regulator, in writing. If the quote does not mention your state's rules, the quote is not finished.
Ask these five and demand answers in writing. One: is the percentage charged on my enrolled debt or on the settled amount? Same headline number, sometimes thousands of dollars apart. Two: what is my total cost in dollars if you settle everything at 50 cents, and again at 70 cents? Three: which creditors on my list will not negotiate with settlement firms, all of them by name? Four: if I quit in month 18, what do I owe, what comes back, and what do I still have? Five: what is your license number in my state? A firm that squirms at any of these has already told you something. The questions work because honest firms survive them and sell themselves on the answers.
The fee buys a negotiator, a system, and access to the desk that handles charged-off accounts. It buys none of the following. It does not buy a settlement, because the creditor says yes or no. It does not buy your credit: every missed payment reports, fee or no fee. It does not buy protection from a lawsuit, and a settlement firm cannot appear in court for you. It does not buy tax relief: forgiven debt over $600 can still generate a 1099-C on a settlement that went well. It does not buy refunds on the late fees and penalty interest that stack while you save. Fee equals effort purchased, not results promised. Once that line is clear in your head, the rest of this page prices itself.