Debt negotiators are often a bad idea for average consumers that are in financial trouble. There are scores of people in debt so the industry is wide open for a good debt negotiator. This can lead to problems and scams.

The debt negotiation industry was started in the 1950s when consumer and credit card debt greatly expanded. In the 1970s, consumer debt was reaching record levels and by the 1990s, credit counseling services, debt negotiators, consolidation loans and other services were being offered.

Banks, finance companies, private businesses and other entities were investing into these schemes. When the United States economy weakened after September 11, 2001, many of the businesses dropped off leaving the customer in peril.

One of the main reasons for the economic mayhem around the world was attributed to the credit crisis. Interest rate had been at record lows making it easy to offer better terms on loans, credit cards, mortgages and other contracts.

Refinancing and restructuring became commonplace for folks burdened by arrears. Debt reduction is an attractive alternative to bankruptcy. All of a sudden, the financial institutions decimated the credit markets and nobody could get money. Now, there are very few consolidation loans to be had and obtaining working capital has been difficult.

This is a problem with debt negotiation. Because of the macro economic mayhem, obtaining helpful consolidation loans is nearly impossible and further limits consumers making bankruptcy inevitable. Another drawback to debt negotiation is that sometimes companies that administer debt management plans do not follow through with the financial lenders and the customer is left hanging.

Often, they wind up in worse shape they had been before the debt restructuring. There were many stories on the national news in the 1990s where debt negotiators advertised, consumers signed contracts to restructure the debt but the debt management companies took money but did not pay the creditors leaving the consumer with a trashed credit file. There have been more regulatory actions to thwart this but many people have been damaged from this.

Debt negotiation is bad for the financial company also. Obviously, they are not getting all the money from the original contract, but the customer is not serviced very well. The initial business plan for the individual customer has not followed the proper course and the relationship is severely damaged or completely lost.

Many financial institutions are just realizing that a failed contract that leads to collection or legal action leaves a path of destruction to the business reputation.

The best thing for the credit card company or lending institution is for the customer to obtain the credit, pay it on time with very little lateness and avoid issues. The best thing for the borrower is to NOT use the credit for anything except for purchasing a home (on good terms) buying a car, or going through college on student loans.

They should only go into debt for an education if absolutely necessary! There are many grants, scholarships and work/study programs to pay for schooling. People should learn to conserve resources and protect them. Credit is only a resource and when abused, will lead to financial ruin that will cause hardship.