Debt reduction scams and debt relief scams are spreading like mildew for some time now during this painful and prolonged economic downturn. The terrible economy has put millions of individuals in financial trouble and one of the biggest issues is credit card debt. Predatory debt relief companies promising peace of mind are seeking out people drowning in debt. But with financial discipline and effort individuals can stay away from even the so-called legitimate debt reduction services.
The debt reduction mirage
Paying off existing debts with more debt is a common tactic of companies hawking debt reduction services. An additional tactic is promising to persuade your creditors to settle for less than you owe. All they care about is signing you up, not whether or not their programs will really work. When it comes to negotiating for a settlement, bear in mind that it will show up on your credit report as failure to pay the debt in full, which will subtract from your credit score.
Debt management misrepresentation
It should be no secret that numerous companies promising to help consumers overwhelmed by credit card and other debts are financial predators that charge high fees but deliver little or nothing in return. The Government Accountability Office, as reported by the Los Angeles Times, sent investigators posing as financially distressed consumers to certain debt management companies. The companies gave them wildly exaggerated descriptions of the firms’ success rates and sometimes promised savings of as much as 50 cents on the dollar.
Debt relief deception
Often consumers end up deeper in debt than they were before paying big upfront fees to debt management companies—which could be a number of thousand dollars. MSNBC tells the story of a woman in North Carolina who was promised by a debt management company that they would lower her interest rates enough to pay off credit card, mortgage and car loan debt three to five times faster. After paying $ 499 up front, she was assured that interest rate savings would make up for the fee in the first 30 days on her way to a total savings of $ 2,500. No interest rates were reduced, the company would not refund the $ 499 fee as they promised and the Federal Trade Commission sued the firm.
A common debt relief ruse
Claiming “government approval is a common angle pursued by debt relief scam artists today. In the very same article, the Los Angeles Times reports that statements made by debt management companies to GAO investigators, as well as their ads, show that the firms try leading people to believe they’re administrators of a government program related to the bank bailout. One company that shows up at the top of search engine rankings for debt relief calls itself the Federal Debt Relief Program. An additional less-than-honest scheme is the “U.S. National Debt Relief Plan.
Do-it-yourself debt relief
Of all the hundreds of debt reduction and debt relief opportunists spreading across the Internet, not one is part of a government-backed program. Debt relief in these troubled times has become a huge industry co-opted by shysters taking advantage of desperate people. The best way to debt reduction is to get on a spending budget, pay down your debt and pay your bills on time. If you are struggling to make payments, contact your lenders to see if you are able to negotiate better terms, lower payments or refinance a car loan or home loan.
Debt management advice is free
The National Foundation for Credit Counseling is a good place to start if you need help with debt problems. Anyone who needs free and confidential advice about debt relief can get it from this non-profit community group. Advice is accessible either over the phone or in person from the NFCC. The website nfcc.org can connect you with a counselor as part of your area.
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Los Angeles Times
latimes.com
MSNBC
msnbc.msn.com
NFCC
nfcc.org
