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Be Careful Of Debt Relief Scams: Tips To Protect Yourself

scammer surrounded by billsIn September of 2013, the federal court in the State of Florida helped the Federal Trade Commission (FTC) in their quest to crack down the lingering debt relief scams that are trying to prey on struggling American consumers.

According the the press release found on the site, the court found the defendants to be guilty of violating the FTC Act by doing the following:

  • Misrepresenting the interest rate reduction services on credit card debts.

  • Misrepresenting policies about refunds.

  • Sending unauthorized billing to consumers.

  • Direct violation of the Telemarketing Sales Rule.

This is just one of the many stories of fraudulent companies that the government is trying to track and shut down to protect the unsuspecting consumers. They are actively campaigning to help consumers learn how to avoid debt relief scams so they will not be swindled out of their hard earned money.

Illegitimate debt relief companies prey on the desperate

The thing about debt problems is it will really cause you to go for desperate measures just to save what little money that you have left. Some people are attracted by “too good to be true” campaigns that are simply just that – too good that it ends up being a fraud.

The Better Business Bureau ( reports that in 2011, the FTC reported that 10.8% of Americans are a victim of fraud. That is equivalent to 25.6 million. The survey from the FTC that was discussed in the BBB article mentioned how most fraud cases happen online. Although the convenience of transacting on the Internet is there, you need to be very careful because a lot of people are easily victimized by all sorts of scams. One of them are debt relief scams.

Among the type of scams on the survey, Credit Repair rank 6th place with 1.7 million victims. On 7th place are debt relief scams that victimized 1.5 million consumers. Mortgage relief scams rank number 10 with 800,000 victims.

According to the FTC survey, a high percentage of the victims did not finish high school or have had a recent negative experience like divorce, illness or a job loss. Those who admit to having a lot of debt are also among the people who are most likely to be a victim of these fraudsters.

Obviously, nobody wants to be a part of this statistic. And since these people are really very sneaky, all you can really do is to do your research and find out how they go about scamming people. Here are 5 signs that you are about to be a victim of debt relief scams:

  • Upfront fees. One defining characteristic of legitimate debt relief companies is the fact that they are able to provide services without asking for upfront fees. This is one quick way of knowing if you are dealing with a fly-by-night company or an established one. The legitimate ones try to earn your trust by showing you that they mean business and they are not collecting anything before they have done their job.

  • Fraudulent practices. There are fine lines in debt relief and even in credit repair that scammers are not too scared to cross over. This is a perfect example of the means not justifying the end. One glaring example is being advised to secure new social security numbers. This is a wrong practice and should not be tolerated. Illegitimate companies would be the type to ask those in debt to consider this to start over a clean slate.

  • Absolute promises. Debt is a case to case basis and there are varying degrees of work that is needed to be debt free. But this knowledge comes only after knowing and assessing every situation carefully and looking at different scenarios and debt relief programs. Scammers will most likely skip this critical step and give big promises of eliminating your debt is given at the start

  • Leaving everything to chance. Debt brings an overwhelming emotion of fear and stress. This is a bad combination and we usually jump on the first “lifeline” thrown our way without thinking it through. Debt relief scams know this and exploit this very weakness debtors have. It is tough but composing oneself and checking emotions outside the door before making decisions will go a long way.  It is important to know the background of the companies by researching first and dealing with them after.

  • Foregoing the fine print. There are people with a knack for reading between the lines. But this should not be the case with debt relief companies. The fine print explains all the general and vague clauses in the agreement. This explains all the details of the contract between debtor and debt relief company. Once you are forced to sign right there and then without being given time to read the fine print, better think twice about the company you are transacting with.

When faced with the decision of choosing a debt relief company to work with, keep in mind these  tips to avoid falling into the trap of scammers.

The TSR: how to spot the illegal ones

The Telemarketing Sales Rule (TSR) is a law that provide consumers with the protection they need against malicious companies that offer debt relief scams. According to the release about the TSR, companies who do not follow these rules are most likely operated by scammers. One of the latest addition to this law is covering not only outbound calls but it includes inbound calls as well.

Here are the important points in this debt relief law that will help you determine the legal companies from the not.

Illegal upfront fees. TSR has made it illegal for debt relief companies to front-load their fees. This is meant to protect the consumers because illegal companies will just collect fees and just prolong your debt problems or worse, disappear without a trace.

If the debt relief company is doing multiple settlements for you one after the other, they are allowed to collect after every successful negotiation with your creditors. Another option is similar to an escrow account where you deposit money to a separate account meant to pay the debt relief company after the transaction is done.

Disclosing information prior to closing. Being an advocate of consumers, the TSR compels all debt relief companies to disclose all basic and pertinent information to their potential clients before signing them into a contract. This protects the consumers by ensuring they are well aware of all aspects of the contract before signing.

This could include the timeline on when the debt relief company could deliver on their promise. It could also be about the costs involved and how much all the fees would be paid at the end. Another would be the negative effects of employing their services in terms of credit standing. These and more are important to be reminded of before signing any contract.

Misrepresentation. Illegal debt relief companies will promise you the stars and the moon just to get you to sign. This is in violation of the TSR too. Debt relief scams will promise you a huge reduction on your debt and most probably in a short span of time. These are too good to be true and they might be. Ensure that the services being offered by your debt relief company are legitimate and something they will be able to accomplish for you.

If you want to file a complaint on debt relief companies that scam people, visiting the FTC website at or calling 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261 can get you talking to the right people in no time.

Learn what you can about these laws and your rights as a consumer. That way, you will be protected from debt relief scams. They always come up with new ways to trick you out of your money so make sure you will stay vigilant.

Don’t Get Hurt By A Debt Relief Scam

Young Man talking on the phone and smilingYou answer the phone. A pleasant-sounding man or woman asks, “wouldn’t you like to reduce your monthly loan payments and credit card payments – guaranteed?” This might sound very appealing, especially if you’re having a problem paying your debts. That nice-sounding man or woman may even say that they can lower your interest rates and reduce your debts.

Beware of claims like this

While you might be tempted to take up the offer, beware. There are con artists running many of these debt settlement programs who can’t and won’t deliver on what they promise. If you sign up for one of these programs it could cost you hundreds of dollars and you could find yourself in worse shape financially than before. You would owe just as much, plus you would likely have to pay late fees and other penalties.

The problem is widespread

The Federal Trade Commission (FTC) has sued more than 12 debt relief companies in the past several years. The Commission says that these companies simply lie about what they can do. They may even say they are nonprofits when they are actually for-profit companies. They claim to be a non-profit because they know that will make you feel better about signing up for their service. Some of the bad guys in this business also lie to people about their charges. They may say they charge nothing or just a very small fee. Some won’t even mention fees at all.

Look for warning signs

If you’re contacted by one of these companies and it claims it can negotiate settlements with all of your creditors that will cut the amount you owe by as much as 50% to 70%, watch out. It is just about impossible to do this under most circumstances. These companies are making promises about something they simply can’t deliver.

A better option

If you’re laboring under a heavy load of debt, credit counseling might be a better option. Real credit counselors understand that there is no one, single answer for everybody. A legitimate counselor will give you a free and unbiased assessment of your situation. He or she will then help you develop a customized payment plan that should enable you to pay off your unsecured debts in five years or less. Even better, you will have to write just one check a month to the credit counseling agency and it will pay all your creditors.

Do the research

If you have mounting debts, it can be very scary. However, what you decide to do about those debts shouldn’t be based on having heard a radio commercial, seen a TV commercial or received a phone call. The important thing is to find a trustworthy company that will create a debt relief plan custom tailored for you.

When debt settlement might make sense

If you’re so seriously in debt you been unable to make even the minimum monthly payments on your debts for five months or more, debt settlement could be a good option. In fact, an honest debt settlement company can settle your debts for less than you owe and provide you with a customized payment plan that should help you become debt free in 24 to 48 months. However, it’s important to choose a company you can trust.

How to know if the company is trustworthy

There are signs that a debt settlement company can be trusted. For example, it should have been in business for a number of years. It should be associated with organizations such as the US Chamber of Commerce and have at least an A-rating from the Better Business Bureau. It shouldn’t require any payments up front and any money you send it should be deposited into an FDIC-insured trust account. Finally, a legitimate debt settlement company won’t charge you anything until it has settled all of your debts to your satisfaction and provided you with a customized payment plan that you approve.

How To Avoid Debt Relief Scams

Young Man talking on the phone and smilingIf you’re having a problem with debt, sit back and relax as there are ways to achieve debt relief. However, it pays to be careful because the Internet is home to many debt relief scams. If you were to get caught up in one of these, you could lose hundreds of dollars and end up in worse financial shape.

What is a debt relief scam?

The simple answer to this question is that a debt relief scam is where a company makes promises that it does not keep. However, these scams are much more complicated than this. They generally start when a debt relief company contacts you and claims it can get your interest rates reduced to help you get out of debt in no time at all. Some of these companies even say they can get your credit card debts eliminated. Many of them also claim to be nonprofits. The person who contacts you will probably sound very professional and very reassuring.

Upfront fees

The first sign that the company may be a debt relief scam artist is if it requires an upfront fee. Legitimate debt relief companies charge nothing until they’ve settled your debts and you’ve signed off on a payment plan.

Legitimate debt relief companies are known by the company they keep

If you are contacted by a debt relief company, the first thing you should do is go to its website. Legitimate debt relief companies are members of the Better Business Bureau and probably the US Chamber of Commerce. They also usually belong to associations such as the American Fair Credit Council and display the BSI Certificate of Registration, showing that its services are in accordance with all the requirements of the Best Practices For Accredited AFCC Members Checklist.

How legitimate debt relief companies operate

A legitimate debt relief company charges no upfront fees (as noted above) and won’t make promises that it can get you out of debt in just a few months. It will require you to provide documentation of exactly how much you owe and to which creditors. You will be required to provide copies of your statements showing how long it has been since you’ve made payments to your creditors.. You will be given a contract to review or even take to your attorney that will spell out exactly what the debt relief company will do for you and how much it charges for its services. Nothing more will happen until you sign and return the contract.

You will begin paying the company

Once you have signed off on your contract, you will begin making payments to the debt settlement company. If it’s legitimate, it will deposit the money in a trust account that only you can manage. The debt settlement company will then start contacting your creditors and offer to settle your debts, probably for about half of what you owe. When all your creditors have agreed to the settlements proposed by the debt relief company, the money you have put in trust will be used to pay them off. You will have an affordable payment plan that should enable you to become debt free in 24 to 48 months.

If it seems too good to be true, it probably is

Don’t fall for promises from debt relief companies that seem to be just “too good”. Call our toll-free number or fill in the form you’ll find on this page to learn what we could do for you. It will take only a few minutes and it could save months of worry and harassment.

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