Imagine receiving a phone call telling you that all your debt worries are over. A company can take care of all your current obligations, lower your monthly payments and get you out of debt 30-70% faster, guaranteed. If this sounds too good to be true, that’s because it usually is. However, for some people, their debt has become so out of control that they fall for this pitch, believable or not.
These so-called debt relief companies have received a lot of negative press lately for unsavory, and often illegal, practices used on desperate consumers. Oftentimes proclaiming to be a debt settlement program, these companies now claim they can negotiate a one-time settlement with all of your creditors, reducing your principal by an exorbitant amount. Problem is, it’s virtually impossible to do this and, usually, is a scheme to kick those who are already down-and-out.
If you are approached by a debt-relief company, take these five factors into mind before signing any contracts or paying any of your hard-earned cash:
- Fees Before Service: If a company requires you to send a large sum of money before they’ll take care of your debt, you likely want to walk away from the situation. In fact, the FTC has actually banned certain upfront fees for debt settlement services to ensure consumers don’t have to pay for services that are promised but never delivered.
- Stop Talking: If you get told to stop talking to your creditors, this should be a big, red flag. This could mean they are telling you lies about what are, but really aren’t, paid off.
- Illegal Practices: Some of these scams send negative (but real) records to the credit reporting agencies and claim they’re incorrect, hoping the information won’t be caught and will be removed from your record. Practices like these are fraudulent and illegal, and not something you want to be mixed up in.
- Paid for Pennies on the Dollar: If you've been told your unsecured debts can be paid off for pennies on the dollar, it’s unlikely that the company is following clean business practices. Either they're lying to you, or they’ll be lying to the credit reporting agencies.
- Promises & Guarantees: Everyone’s credit is different and unique; at no point should a company make a promise to eliminate all your debt in a year or a guarantee to raise your credit score. If you’re getting told stories that seem far-fetched, they probably are and you should proceed with caution.
If you’re struggling with debt, avoid the scammers. For many people, getting out of debt is a matter of making smart choices and having patience. If you’re looking for a way to consolidate your high interest loans and free yourself from debt, contact Florida Credit Union. We offer Debt Consolidation Loans that are tailored to your situation. Avoid the rip-off’s; call FCU!
Have you ever dealt with a debt relief scam? Tell us about it in the comments below!
Want more articles about Money Safety? Check out this piece: 3 Steps to Digging Out of Debt