The long, deep recession and its aftermath have created an environment in which debt reduction scams and debt relief scams flourish. The terrible economy has put millions of individuals in financial trouble and one of the biggest troubles 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.
Debt reduction pitfalls
Most companies offering debt reduction services pitch debt reduction services where you pay back existing debts with one more loan. One more tactic is promising to persuade your creditors to settle for less than you owe. Too often what matters most to them is taking your money, not helping you reduce your debt. And one thing they won’t tell you is that paying less than you owe shows up on your credit report as failure to settle your debt in full, which wreaks havoc on your credit score.
Debt relief scammers
That financial predators sell themselves as legitimate companies with the ability to help consumers overwhelmed by credit card debt is no secret. The Los Angeles Times reports that the Government Accountability Office sent investigators to debt management companies posing as debt-ridden consumers. 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 reduction false promises
Big upfront fees—as much as various thousand dollars—collected by debt relief companies often leave their customers worse off than they were before. An MSNBC report exposed a debt management company that promised a woman in North Carolina that they would lower her interest rates on credit card balances, a mortgage and car loan low enough to pay them off five times faster. She was promised that the savings from lower interest rates would pay for the $ 499 fee within the first 30 days and that her total savings would be $ 2,500. The Federal Trade Commission sued the firm after they refused to refund the $ 499 fee after failing to deliver on those promises.
A debt relief scam trend
Debt relief criminals today often try to exploit the “government approved” angle. Within 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 the firms try leading individuals to believe they are 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. Another less-than-honest scheme is the “U.S. National Debt Relief Plan.
Self reliance is the best 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 has become a huge industry intended to kick individuals when they’re down. The best route to debt relief is nevertheless getting on a budget, paying your bills on time and saving money to spend on debt reduction. People don’t need a debt management business to negotiate with creditors or refinance loans when they can do it themselves.
Free debt management advice
If you aren’t sure how to solve your debt problems, contact the National Foundation for Credit Counseling. The NFCC is a nonprofit community organization that provides free and confidential debt management advice to anyone that needs it. The NFCC offers consulting in person or by phone. The website nfcc.org can connect you with a counselor in your area.
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Los Angeles Times
latimes.com
MSNBC
msnbc.msn.com
NFCC
nfcc.org
