During this wrenching, endless period of economic doldrums, debt relief and debt reduction scams have spread like wildfire. With millions in financial trouble, credit card debt is a bigger problem than ever. The anxiety and pain of overwhelming debt makes some individuals an easy mark for debt consolidation predators. But with financial discipline and effort individuals can avoid even the so-called legitimate debt reduction services.
Debt relief dangers
Most companies offering debt reduction services pitch debt reduction services where you pay down existing debts with an additional loan. Another tactic is promising to persuade your creditors to settle for less than you owe. Too often what matters most to them is taking your money, not helping you reduce your debt. And one thing they won’t tell you is that paying less than you owe shows up on your credit report as failure to settle your debt in full, which wreaks havoc on your credit score.
Debt management misrepresentation
It should be no secret that numerous companies promising to help consumers overwhelmed by credit card and other debts are financial predators that charge high fees but deliver little or nothing in return. The Los Angeles Times reports that investigators for the Government Accountability Office posed as distressed consumers seeking help from debt management companies. Sometimes promising debt reduction of up to 50 cents on the dollar, the companies made wild exaggerations of their success rates.
Debt reduction fantasies
Big upfront fees—as much as a number of thousand dollars—collected by debt relief companies often leave their customers worse off than they were before. MSNBC reports on the ordeal of a woman in North Carolina who fell for the pitch from a debt relief company that she would save enough with lower interest rates to pay off credit cards, a mortgage and a car loan five times faster. After paying $ 499 up front, she was assured that rate of interest savings would make up for the fee in the first 30 days on her way to a total savings of $ 2,500. No interest rates were reduced, the company would not refund the $ 499 fee as they promised and the Federal Trade Commission sued the firm.
Common debt relief scams
Debt relief criminals today often try to exploit the “government approved” angle. The Los Angeles Times article reports that advertisements by debt management companies, as well as statements by business representatives to GAO investigators, provided evidence the firms lead clients to believe their services are part of a government program comparable to the recent bailout of troubled banks. One of these companies with a prominent Internet presence is called The “Federal Debt Relief Program”. Another is called “U.S. National Debt Relief Plan”.
Debt relief through self-discipline
There are hundreds of debt reduction and debt relief companies infesting the Internet, but there’s no government-backed credit card debt relief program. Debt relief in these troubled times has become a huge industry co-opted by shysters taking advantage of desperate people. Getting on a spending budget that allows you to pay your bills on time and pay down your debt is still the best route to debt relief. Negotiating better terms or lower payments and refinancing car or home loans are actions you are able to take yourself.
The best debt relief advice is free
For help with debt difficulties, the National Foundation for Credit Counseling is a good place to start. Anybody who needs free and confidential advice about debt relief can get it from this non-profit community group. You can consult with them over the phone or in person. The website nfcc.org can connect you with a counselor with your area.
Additional data at these websites
Los Angeles Times
latimes.com
MSNBC
msnbc.msn.com
NFCC
nfcc.org
