It’s for important for consumers to understand how debt consolidation scams work in order to effectively avoid these potentially dangerous pitfalls. These consolidation scams are typically appealing offers and advertisements that show up on late night infomercials or along the borders of some your favorite web pages. Many fraudulent businesses present themselves as debt relief services that can easily help erase consumers’ credit problems in an instant. It’s always best to conduct the appropriate due diligence in order avoid debt consolidation scams and find the best professional service that can cater to your needs.
Is The Service Worth The Premium?
Many of the debt consolidation scam services charge high monthly premiums for very little work. Some of these services charge from $400 to $500 per month and typically try to collect payments before creditors are paid. Many times this results in the debt relief service getting paid while the debtor’s financial situation continues to deteriorate. It’s important to note that the Credit Repair Organizations Act safeguards consumers against consolidation scams by prohibiting these firms from charging fees before successfully providing services rendered.
Avoid Debt Relief Services With These Red Flags:
- High initial fees for service
- Requesting personal info before signing an agreement
- Interest rates that seem too low to be true
- Unethical advice
Understanding the Red Flags
The easiest way to avoid debt scams is by identifying some of the signs that characterize these types of shady businesses. Consumers should avoid any services that ask for a premium that exceeds a reasonable percentage based on your current debt. Avoid giving any debt consolidation company your personal information before having a signed service agreement. Many consolidation scams are designed to steal consumers’ identities.
Be Wary of Bad Advice
Debt consolidation services that provide questionable advice for consumers to avoid credit bureaus, credit counseling, discontinue payments to creditors or deposit funds into a trust account should be considered as potential scams. Some of these consolidation scam services will also compel consumers with bad credit to create a new identity in order to circumvent their current levels of debt as well. Always take the time to speak with a credit counselor, a credit bureau or a certified accountant to get a reliable second opinion.
Easy Step to Avoid Debt Scams
- Check with the Better Business Bureau
- Check the debt relief firm’s track record
- Check online for reliable testimonials
The number of scams surrounding debt consolidation has increased recently as more consumers are debt-laden and seeking professional assistance. However, there are several easy steps that consumers can take to avoid these types of predatory services. One of the most important first steps for every consumer is to verify a debt relief service’s accreditation with the Better Business Bureau. It’s also helpful to do comprehensive research on the firm’s past performance as well.
Don’t Be Fooled By Their Charm
It’s important for consumers to not let the stress that comes with debt coerce them into making poor or hasty decisions. The consumers most concerned or confused by their debt situation are typically the ideal targets for debt relief scams. It’s also important for consumers not to be lured into a false sense of security by seeing the “non-profit” status. The FTC has actually busted several different “non-profit” debt relief scams that were simply laundering or funneling the proceeds to for-profit parent organizations. These types of scams readily use words like “Foundation” or “Council” to dupe unsuspecting consumers that are struggling with debt.
FTC Recommendations To Avoid Debt Scams:
- Avoid debt relief firms that try to pressure consumers into a plan
- Thoroughly research the company and its debt relief services
- Favor options and information over lofty promises
- Check with creditors to see which companies will work with
- Always review the fine print and contract stipulations with care
- Pay special attention to the timeframe
- Check with creditors to make sure they accept the debt relief plan before making any payments
- From the onset, monitor statements closely and confirm that creditors are receiving payments
- Be wary of excessive fees and voluntary fees
Find Some Reliable Feedback
Checking with the internet, friends, acquaintances and family members is a very effective way to get testimonials and references for the debt relief services under consideration. Social networking platforms can be very effective for providing an expansive perspective on what type of feedback these debt relief services typically get from consumers. Finding a reliable resource for consumer reviews of different debt relief firms can also be invaluable when it comes to avoiding debt consolidation scams.