Financial Outcomes for Debt Settlement Programs – Second Edition

Financial Outcomes for Debt Settlement Programs: Estimates for 2011-2020

Second Edition - January 15, 2021
Will Dobbie
  • Professor of Public Policy Harvard Kennedy School

The American Fair Credit Council (AFCC) commissioned this report in 2020 in order to look at the financial outcomes of individuals enrolling in a debt settlement program using detailed data for a sample population of approximately 450,000 individuals and 3,100,000 accounts. In addition, this study measured the outcomes for individuals up to March 2020, just before the onset of the COVID-19 pandemic, while also examining the methodology, analyses, and results described in a series of reports by Hemming Morse, LLP (Greg Regan) to determine whether the data support the Regan Reports’ analyses and conclusions.

In reviewing the evidence this recent work, Dobbie found that debt settlement programs had the potential to significantly benefit many financially distressed individuals, particularly if they were not eligible for Chapter 7 bankruptcy protection or wish to avoid the negative consequences of Chapter 13 bankruptcy restructuring.

Key takeaways include:
  • Individuals starting a debt settlement program had, on average, almost $28,000 in unsecured debt across 6.93 accounts.
  • 74 percent of this population successfully settled at least one account through a debt settlement program over the first 36 months.
  • These individuals also settled approximately 55 percent of their enrolled debt through the program during this time.
  • Settled accounts yielded an average savings of about $1,400 based on the current balance owed to the creditor at the time of settlement and after accounting for fees, with individuals in this cohort saving an average of just over $5,400 on settled accounts based on the current balance and after fees.
  • Clients enrolled in debt settlement programs received an average debt write-down of 32 percent on settled accounts after accounting for fees.
Companion Reports

Options for Consumers in Crisis
An Updated Economic Analysis of the Debt Settlement Industry

In 2012, the American Fair Credit Council (AFCC) commissioned the first-ever independent analysis of the economic impact of the debt settlement industry on enrolled participants. Since then, the AFCC has commissioned four reports overseen by Greg Regan of Hemming Morse LLP, all of which exemplify the immense benefits of debt settlement for consumers struggling with unsecured debt.

State Versions
Options for Consumer in Crisis

The following state-specific versions of the recent independent “Regan Report” are a supplement in the series of reports overseen by Greg Regan of Hemming Morse LLP. These iterations exemplify how debt settlement serves consumers in financial hardship each day by offering significant and measurable financial benefits.

Financial Outcomes for Debt Settlement Programs

The American Fair Credit Council (AFCC) commissioned these two reports in 2019 and 2020, both of which were completed by Will S. Dobbie, Professor of Public Policy at Harvard Kennedy School of Government. The reports examine current evidence as well as past research conducted by Greg Regan of Hemming Morse LLP, while concluding that the Regan Report’s results were correct and debt settlement programs offer significant benefits to financially distressed individuals.

Economic Impact Report

The 2019 and 2020 Economic Impact Reports analyze the debt settlement industry’s national and local economic impact. These independent studies, which were commissioned by the AFCC from John Dunham & Associates, demonstrate the overwhelming importance of debt settlement for consumers, the U.S. economy as a whole, and state economies across the nation.