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Beware of Debt Relief Scams

Many consumers who are drowning in debt are being duped into seeking help from companies representing themselves as debt relief specialists.  And getting nothing in return.

These companies offer to settle a consumer’s debt with creditors for substantially less than the debt’s principal through monthly payments that the company holds in escrow.  Unfortunately, many of these companies take the consumer’s money,  vial large upfront fees,  and then fail to offer any services at all.   In other instances, a large portion of the consumer’s monthly payment is applied to the debt relief company’s fees, with little to nothing offered toward reducing the debt’s principal.

Below are some tips recommended by The Department of Justice Consumer Protection Branch, that may help you avoid scams:

  • Fraudulent debt relief companies will often make claims of being able to negotiate a one-time settlement with creditors that will reduce a consumer’s principal by fifty percent or more.  The Consumer Federation of America, an association of non-profit consumer organizations, warns that such a promise is a virtual impossibility.
  • If you have trouble making credit card payments, immediately call the creditor to work out a payment plan.  If that is unsuccessful, a non-profit credit counseling service may be able to help you.  These services may charge a small fee, but the cost will be substantially less than using a debt relief company.
  • If a company offers a “one size fits all” solution, what they are really offering is a “no size fits anyone” problem.  Legitimate credit counseling services tailor a consolidation plan to each consumer’s individual needs.
  • Do not be afraid to ask questions.  Demand that the company disclose set-up and maintenance fees, and that these fees be set in writing.  According to the Consumer Federation of America, consumers should not pay more than $50 for the set-up fee and $25 for monthly maintenance of the account.
  • Do not rely on the company’s website.  Conduct your own searches of the company – the Better Business Bureau and state consumer protection agencies are excellent resources.

If you are drowning in debt and have been unable to work out a payment plan with your creditor or if your creditor has been harassing you in violation of the Fair Debt Collection Practices Act (FDCPA) , please give me office a call today.  The Law Office of Todd M. Friedman at (877) 449-8898.