Last reviewed: 15 October 2026

When can a debt settlement company charge you?

The short answer

If a debt relief company sells its service over the phone, the federal Telemarketing Sales Rule says it cannot ask for or take any fee until all of these have happened:^[1]

1. It has settled, reduced or otherwise changed the terms of at least one of your debts under an agreement you sign. 2. You have made at least one payment to the creditor or debt collector under that agreement.

How the fee is limited when debts settle one at a time

When debts are settled one by one, the rule says the fee for each one must either:^[1]

• be a proportional share of the total fee, matching that debt's share of all the debt you enrolled, or
• be a percentage of the amount saved, using the same percentage for every debt. The saving is the amount you owed when you enrolled minus the amount you actually paid.

Dedicated accounts

A company may ask you to put money in an account that is later used for settlements and its fees. The rule allows this only if:^[1]

• the account is at an insured financial institution,
• you own the money and any interest it earns,
• the account administrator is not owned by, controlled by or affiliated with the debt relief company, and gets nothing for referrals,
• you can withdraw from the account and stop at any time without penalty, and get your money back within seven business days, minus fees already earned.

The CFPB notes that you may be charged fees for using this account.^[2]

Risks the CFPB lists

The CFPB says that working with a debt settlement company can involve:^[2]

• high fees,
• late fees, penalty interest and more collection activity if you stop paying your bills,
• creditors who refuse to work with the company,
• debts that never get settled,
• a lawsuit from a creditor,
• harm to your credit scores,
• possible income tax on forgiven debt.

Warning signs

The CFPB says to avoid a company that:^[2]

• charges any fee before it settles your debts,
• promises to settle all your debt for a set percentage,
• talks about a "new government program" for credit card debt,
• guarantees it can make your debt go away,
• tells you to stop talking to your creditors,
• says it can stop all collection calls and lawsuits.

Other options

The CFPB lists these alternatives: a nonprofit credit counselor, negotiating with the creditor yourself, or talking with a bankruptcy attorney. This page does not rank or recommend any one of them.^[2]

FAQ

Can a debt settlement company charge me before it settles a debt?

Not if it sells its service by phone. The Telemarketing Sales Rule bars any fee until at least one debt is settled under an agreement you sign and you have made at least one payment under it.

Can the company ask me to save money in a special account?

Yes, under conditions. The account must be at an insured institution, the money stays yours, and you can withdraw at any time without penalty.

References

1. [1] 16 CFR 310.4(a)(5), Telemarketing Sales Rule (eCFR, accessed 2026-10-15). https://www.ecfr.gov/current/title-16/chapter-I/subchapter-C/part-310/section-310.4
2. [2] CFPB: What is a debt relief program and how do I know if I should use one? (last reviewed by CFPB Aug 28, 2023; accessed 2026-10-15). https://www.consumerfinance.gov/ask-cfpb/what-are-debt-settlementdebt-relief-services-and-should-i-use-them-en-1457/