Debt Relief and Credit Repair Scams Gain Momentum
January 19, 2012 § Leave a comment
This excerpt from Avvo.com discusses debt relief and credit card scams which have been growing across the country. With so many Americans facing large consumer debt with the housing crisis, manufacturing reductions and record unemployment, the proliferation of businessesdeveloped purely to scam those who are already desperate and under pressure has risen dramatically. According to Avvo there were 8 such scams reported in 2003. In 2008 more than 2000 were reported.
Debt relief scams come in a few different forms. Some will tell you they can get your creditors to lower the overall amount you have to pay, while others claim they can get your creditors to lower their interest rates. They may promise to stop creditor calls, or tell you that if you give them a certain amount of money per month, they will pay off your creditors for you. You can count on getting socked with a fee, which is occasionally exorbitant, but you may see little or no improvement in your debt situation and may be left in worse financial shape than ever.
Not only are many of these companies unable or unwilling to fulfill their promises of debt relief and lower interest rates, but the fees often go unmentioned or the company lets you think the initial payment will go toward your debt, when it really doesn’t. Occasionally you will be asked to set up an account out of which they are to pay your creditors, but it’s also used as a source for additional fees. Fake credit repair companies promise to repair bad credit for a fee, but don’t actually do so even after you’ve paid them. These companies prey on your desperation and trust, making reassuring promises while collecting your financial information and convincing you that enrolling in their programs will save you.
Making An Example
Last May, the Federal Trade Commission shut down two such companies, Advanced Management Services NW LLC and Dynamic Financial Group, for placing illegal robo-calls to consumers (including those on the Do Not Call Registry) which claimed to dramatically lower their interest rates. After customers paid their fees—up to $1,995—the companies simply sent instructions on early debt payoff. Though Dynamic Financial Group offered a refund to customers who didn’t save a particular amount, they failed to actually pay the refunds. The company heads were banned from offering debt relief services or making robo-calls in the future. They were also fined millions, but not all were able to pay, leaving some scammed consumers out of luck.
Reliable Debt Relief Resources
Fortunately, reliable debt relief and credit counseling services do exist and can help if you are in debt over your head. Here are some things to keep in mind when looking for help:
• Compare at least 3 companies, with an understanding of the differences between debt consolidation, debt settlement, and credit counseling. Find out as much as you can about the services and fees of each company.
• Check the Better Business Bureau and ask for references.
• Know that legitimate companies will spend at least 20 minutes becoming familiar with your finances, and will put together a plan that fits your specific needs. One size does not fit all in debt relief.
• According to the Consumer Federation of America, you should never have to pay more than $50 up front and $25 for monthly maintenance. If fees are significantly higher than that or vague, it’s a red flag.
• A good starting point is the National Foundation for Credit Counseling, which can help you find a legitimate financial counselor in your area.