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Debt Relief Scams

Posted By:  |  July 29, 2016  |  0 Comment(s)

Since debt relief programs deal with one’s personal and financial information, it is important to avoid all of the scams and companies who make fake promises. A lot of companies trick people into paying a large fee upfront, but then fail to actually resolve or settle their customers’ debt.

A Few Debt Relief Scams To Watch Out For


LowerMyBills.com

LowerMyBills.com is widely called a scam by customers, and has been known to sell personal customer information to salespeople. Even without pressing “submit,” if customers input personal information into the website, the company saves it. People also report receiving multiple spam emails, and calls that don’t stop after unsubscribing from the company.

Debt Pro 123

This company promises to reduce client debt by 70 to 80 percent, including all fees. Debt Pro 123 advertises settlements as low as 10 percent, and savings of 20 cents per dollar spent (including fees). It claims to make customers debt-free quickly and comfortably. Debt Pro 123’s website even offers debt calculators.

However, research shows that more than half of consumers’ monthly payments go toward defendant fees. Consumers who are in the program longer than 18 months have to pay a $49 monthly maintenance fee. Additionally, clients claim that Debt 123 promises to have a legal department to help customers, but they do not actually have one.

Southeast Trust

Southeast Trust claims to be a nonprofit debt relief organization, and has been know to contact hundreds of people through illegal robocalls (recorded automated sales calls). The company advertises 0-percent credit card interest rates—a huge red flag right there. The FTC actually filed a 2.7 million dollar judgment against this company.

How to Recognize Debt Relief Scams


One should look out for the following key warning signs:

  • Companies that charge fees before settling one’s debt
  • Program that guarantee they can make unsecured debt disappear
  • Businesses that claim they can stop all collection calls and lawsuits
  • Companies that do not provide free information on services until one provides personal and financial information (bank accounts, credit card numbers, etc.)

 

How to Avoid Debt Relief Scams


You should never pay large sums upfront. Ethical companies will not charge anything until the debt has been settled, or resolved. It is important to read the company’s fine print, and research their reputation. It is also helpful to explore feedback from previous customers who used the company’s services. People should take everything with caution when investing time and money into a debt relief program. When companies “guarantee they can get their clients out of debt in a certain period of time, or promise “absolutes,” these are big red flags. Scam debt relief programs can end up costing more money in the long run, and make matters a lot worse for people already struggling in debt.

 

Sources:
https://www.consumer.ftc.gov/blog/avoiding-debt-relief-scams
http://www.nolo.com/legal-encyclopedia/debt-consolidation-v-bankruptcy.html
https://www.washingtonpost.com/business/get-there/telltale-signs-of-debt-relief-scams/2015/10/15/b3fe20f2-712d-11e5-8248-98e0f5a2e830_story.html
http://www.moneymanagement.org/Community/Blogs/Blogging-for-Change/2013/May/Five-signs-you-are-being-scammed.aspx

 

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  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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