How Can You Avoid Debt Relief Scams?
Once you accumulate debt, it can seem impossible to get out of it. When that happens, people often turn to debt relief companies to help them. However, while certainly there are legitimate ones, one should be aware there are also many that use abusive practices to scam consumers out of money. Here are some tips on what you should look out for when it comes to a debt relief company.
The most common problem with some debt relief companies is something you’ll see in other industries – incompetence. When you sign up for a credit counseling program, you send money to the company, and they use that money to pay your creditors. Unfortunately, some non profit debt consolidation firms send in payments late or skip them entirely. That can lead to disaster for you – late fees, increased interest rates and of course damage to your credit score. This being the case, it is important you monitor your own credit statements each month.
Another growing issue with debt relief companies is the fee they charge. Often times, debt relief companies require paying up front fees in order to enroll in plan, and other times, they charge a high fee comes out of your monthly payment. By doing this, your creditors may not be getting enough of your payment to adequately pay down your debt. Enrolling in a debt relief program will also help you in your credit restoration.
In particular you are dealing with an agency that purports to be not-for-profit, they should be offering you free resources to educate you about credit management during the course of your program. Some companies do not provide these at all, while others provide them for a fee. Any reputable company will be happy to offer education that will keep you out of trouble in the future. If they do not and are a non-profit, it is likely they are using their non-profit status to skirt regulatory requirements imposed on for profit debt relief companies.
For example, for profit companies cannot charge fees in advance of any services they provide a client. Furthermore, for profit companies are required to pay both federal and state income taxes. Non-profits have none of these requirements and in fact, many get government grants and funding from the creditors. In other words, if you are dealing with a non-profit agency that has no interest in educating you on how to better manage your credit and budget, then chances are you are dealing with an agency that is operating fraudulently.
February 22, 2011 11:16 am 
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