Debt Relief Companies

4 ways to tell that the debt relief program you’re exploring isn’t legit.

Facing challenges with debt is stressful enough. From past due notices to collection calls, being in debt brings constant stress. The last thing you need is to add to your stressed by getting scammed. Unfortunately, there are companies out there bent on taking advantage of consumers who are already in a bad situation. They know you’re desperate and willing to do anything to get out of debt, so they use that sense of urgency against you to get money without actually doing anything to fix your situation.

So while debt definitely sucks, getting scammed by a disreputable debt relief company definitely makes it suck worse. The information below is designed to help you avoid getting scammed by a disreputable “service provider.” We identify the four main ways you can spot a scam, so you can find a real debt relief service provider so you can start getting real relief as soon as possible.

Sign of a scam No. 1: To-good-to-be-true claims

“We guarantee we can settle your debt for just pennies on the dollar.”

Ever heard that claim on a commercial on either late night or daytime local television? How can they guarantee something about your debt if they’ve never even talked to you?

The unfortunate truth is that claims that seem to be too good to be true usually are just that. Words like “guarantee” are usually a dead giveaway of a scam unless there is an actual guarantee that they offer – like a 60-day money-back guarantee and it is in writing. Ask any debt relief or debt settlement company if there offer is in writing and see what they say. So if there’s not a formal guarantee statement that’s provided with a bunch of disclaimers and fine print, you’re probably dealing with a scam.

Sign of a scam No. 2: Unsubstantiated claims

This carries on from the first sign of a scam. Unsubstantiated claims are when a debt relief company states a specific number that they can’t back up. For example:

“This program will boost your credit score by 100 points or more over the next year.”

This claim is different from one that’s too good to be true, and it’s harder to spot because it may have a grain of truth to it. For instance, if you’re a consumer with a rock-bottom bad credit score of less than 600 and you take certain actions over the course of a year, there’s a good chance you could build your way to a score that’s 100 points better within a year – with or without their program. However, that claim doesn’t apply to everyone.

Ever see the fine print on commercials that reads something like, “Results not typical”? Well, that’s where this sign of a scam comes in. Any numeric claim that a company makes should be backed up by data. And any representative that works for the company should be able to give you the information that backs up that claim.

Sign of a scam No. 3: Large upfront fees

There are several federal laws in place that prohibit debt relief companies from charging large fees upfront before debt settlement services are rendered. When companies charge fees upfront, they basically make you pay for the initial consultation and all of the paperwork they do on your case. You pay a bunch of money to them to get started only to find out a few weeks later that, “Sorry, it turns out we can’t help you.” They have your money and you’re no closer to finding a solution than you were when you started.

A debt relief company should only be paid once they actually start helping you. So credit counseling agencies should only get paid after your creditors have agreed to allow you to enroll their debt in your debt management program. A debt settlement company should only get paid only after they begin helping you in a tangible way and/or after they’ve settled at least one debt on your behalf. If you’re paying before you see any actual relief or you’re charged large upfront fees without a money-back guarantee or written refund policy, be careful because it’s probably a scam.

Sign of a scam No. 4: No BBB rating

The Better Business Bureau is your best resource when choosing a reputable service provider in almost any area of your life, but especially when it comes to financial services. If the company doesn’t have a BBB rating because they never applied for accreditation, that’s a bad sign.

Of course, if the company is rated by the BBB and it’s rated badly, that’s not good either. You generally only want to work with A and A+ companies to ensure you’re working with legitimate services that work the way they claim they work. But even a B-rated company is better than a company with no rating at all. Avoid no-rating companies altogether and check out the company’s client review with the Better Business Bureau. If a debt relief company has been in business for any length of time, they should have reviews from actual clients.

Just make sure to read any debt relief service provider’s page carefully. Other big warning signs are class action lawsuits by State or the federal Attorney General’s office. You should also be wary if the company has a number of unresolved complaints.

It’s important to note that the one financial relief service where this tip doesn’t work is with credit repair. The Better Business Bureau does not rate any credit repair service because the industry as a whole is so problematic when it comes to fraud and scams. Since disreputable services are so few and far between, the BBB won’t even rate a credit repair company. So if you’re repairing your credit, you may want to figure it out on your own or simply work with a local state-licensed attorney.

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