Avoiding Debt Relief Scams
You’ve heard about debt relief, and you think it would be a good way for you to get out from under what’s become overwhelming debt. However, you’ve also heard about the pervasiveness of unscrupulous actors in the industry. While most debt relief companies are above board, there are people out there who are looking to cheat you out of money you certainly don’t have to spare.
With that said, here’s what you should know about avoiding debt relief scams.
Just What is Debt Relief?
Also known as debt settlement, the financial strategy entails hiring a company such as Freedom Debt Relief to negotiate with each of your creditors – typically credit card issuers – to hopefully allow you to pay less than what you owe in exchange for your debt to be marked as “settled.” Creditors are usually amenable since they understand that a bankruptcy filing might net them zero, or very little. The process takes between two and four years, which is significantly less than the time it would take for you to erase your debts by making minimum payments.
Debt Relief and Scams
Wherever money and vulnerability are, scams tend to abound. While, yes, most debt relief companies are legit, there are flim-flam artists out there who seek to take advantage of the emotional state of people in your situation.
The fact is that when you’re up to your eyeballs in debt, it’s easy for you to be taken in by anyone who promises to bail you out. Oh, and usually for pennies on the dollar. Some agencies will simply take your money and skedaddle, while others will string you along while taking your money and making your situation worse.
The good news is that there are red flags that can signal likely trouble.
How Can I Spot a Scam?
Steer clear of companies that:
- Refuse to give you program details until you cough up information such as your credit card account numbers.
- Seek payment up front. That is patently illegal. A debt relief company is prohibited from collecting fees before it has settled at least one of your debts.
- Lack transparency. Before asking you to enroll, a debt relief company must inform you about services it will provide, how long it will likely take before your debts are cleared, and how much its services will cost. It also must explain any associated risks and give you information about the account you will need to establish to have money to pay your settlements.
- Mislead you. As per the Federal Trade Commission, a debt relief company is prohibited from making untrue or unsubstantiated claims about its services.
- Make guarantees. Yes, debt relief is usually a successful strategy that offers an opportunity to begin a new life. However, negotiations are inherently unpredictable. There are no guarantees.
- Lack accreditation. You certainly want a company that’s accredited by the International Association of Professional Debt Arbitrators and the American Fair Credit Council.
What Actions Can I Take?
For one thing, you do need to do some homework. Check with your area consumer protection agency and your state’s attorney general, to see whether there have been complaints against the company in which you’re interested. Also, go online for testimonials about the company. There should be no problem finding them from satisfied customers.
You also should learn about disclosure requisites for debt relief companies, which are required to set forth their fee structure and give you some idea of how long it will take to resolve each obligation.
Further, run away fast from any company that breathlessly heralds the emergence of a “new government program” that can get you out of debt. If any new such program existed, chances are you would’ve heard about it.
Ultimately, avoiding debt relief scams requires you to slow down, despite your situational urgency, and determine whether what an agency is trying to sell you makes sense. Do not be rushed. And remember, if things sound too good to be true, they likely are. If you’re looking for a debt settlement company that is accredited and experienced, we do recommend Freedom Debt Relief.