Avoiding Debt Relief Scams

Debt relief scams prey on vulnerable individuals, promising to reduce debt or repair credit. Let our team of experienced debt relief advisors expose scammers’ tactics and explain why seeking legal advice is crucial.

Key Takeaways

• Debt relief scams may promise debt reduction, but they often demand upfront fees and produce no real results.
• Warning signs of debt relief scams to recognize include unsolicited offers, high upfront costs, bold promises, and government program claims.
• Legitimate debt settlement requires reviewing consumers’ financial situation and may have risks.
• Debt settlement, even through legitimate services, isn’t the right answer for everyone. Consider alternatives like debt consolidation to preserve one’s credit score. Experienced bankruptcy attorneys can help people with debt explore their options.  

Q: What are common signs of debt relief scams?

A: Beware of unsolicited offers, high upfront costs, bold promises, and claims of government programs, all of which are common signs of debt relief scams. Review debt relief options carefully with a knowledgeable debt advisor.

Q: How can I avoid being scammed and manage debt safely?

A: To avoid falling for debt relief scams that prey on people looking to manage their debt, research debt relief organizations, consider alternatives like debt consolidation, and be aware of potential credit risks and legal consequences.

Debt Relief Scams – What Are They?

Debt relief service scams prey on people who have large credit card debt. 

There are legitimate services available to help people manage their debt. However, scammers achieve financial gain by pretending to arrange a settlement or reduce repayment requirements with their creditors. In a debt relief scam, only the scammer benefits, while the individual trying to manage their debt has an even worse financial situation. 

These businesses frequently demand a hefty upfront payment from financially challenged clients. But they seldom provide meaningful assistance in debt settlement or reduction, if they offer any assistance at all. 

Unsolicited offers to settle one’s debt often constitute debt relief scams. Through automated “robocalls,” debt relief scammers market their services even to those on the Do-Not-Call List.

There are different kinds of debt relief scams, such as auto loan modification and credit repair scams. Scammers who offer to modify auto loans claim to be able to lower borrowers’ monthly lease or loan payments to prevent repossession of the vehicle. Scams that promise to restore or repair credit target borrowers with poor credit scores or other problems. These services deceive people into paying high fees to supposedly remove information that negatively affects one’s credit from their credit reports. 

Debt relief and credit repair scams are predatory and illegal. In fact, the Federal Trade Commission (FTC), which is charged with protecting American consumers, has filed several law enforcement actions against businesses that engage in these scams. 

The representative of a debt relief scam company may even assert that they can get any unfavorable material removed from a consumer’s credit record for a fee. These fees are often charged upfront and can be astronomically high. 

In spite of the efforts of the FTC and state government agencies, debt relief scams remain common. Consumers must be alert to the risks these scams pose when exploring options for managing their debt, especially when encountering unsolicited debt settlement offers. 

How Do These Debt Settlement Scams Work?

A debt relief scam usually starts when an unscrupulous person or company contacts a consumer and promises to lower or settle their debt. 

In most debt settlement scams, the predatory company convinces the consumer they’re supposedly helping to pay for assistance upfront. 

Unfortunately, once this scammer has received the consumer’s payment, they’ve gotten what they wanted. The consumer is left in even worse financial shape. 

For one thing, the money the consumer paid the scammer could have been better spent paying down their debt. Further, the company’s advice to stop communicating with creditors and the missed payment deadlines that result may have a long-term negative impact on one’s credit score.  

How to spot a debt settlement scam

Consumers shouldn’t fool themselves into thinking they’re too clever to fall for a scam. The people and companies posing as debt settlement organizations can be very convincing, especially when the promises they make are exactly what consumers struggling with debt want to hear. 

Know the warning signs of a debt relief scam, including: 

• Unsolicited offers: Consumers should be cautious if they receive calls, robocalls, or text messages claiming to be able to help them lower or settle their debt. Anyone initiating contact offering to take care of a consumer’s debt for an upfront fee should immediately raise suspicions. Reputable debt settlement businesses typically don’t cold-call prospective customers. 
• Upfront costs: Any instance in which the debt relief business is trying to charge consumers fees before doing any work on their behalf is a reason to proceed with additional caution. Con artists may assert that these costs are payments to creditors and that such payments can erase bad information from one’s credit record. In fact, the scammer is taking the money for themselves.
• Bold promises: There are no guarantees in legitimate debt settlement efforts. If a business makes any kind of assurance regarding results, like promising to lower one’s debt by a certain percentage or raise one’s credit score, that’s a red flag. 
• Requests to stop communicating with creditors: When a debt relief firm advises a consumer to stop communicating with their creditors entirely, there’s a good chance it’s not a legitimate service. Instead of following this questionable advice to cease contact with creditors, the consumer should look elsewhere for debt relief help.  

• Mentions of government initiatives and legal loopholes: There’s a reason obscure legal loopholes and brand-new “government programs” that promise to help consumers pay off debt sound too good to be true. When debt relief companies promote such loopholes and programs, it’s usually an effort to make what’s really a scam sound more respectable. 

• Enrollment without reviewing the consumer’s paperwork: A reputable debt settlement business would carefully review the consumer’s documents to evaluate their financial status before committing to work with them. Only by doing this homework can a debt advisor understand the individual’s financial situation and determine what route offers the best options for managing their debt. Scammers don’t intend to make any real efforts to improve the individual’s financial situation, so they don’t need to review the consumer’s information before offering their services (for a fee, of course). 

Consumers need to research any offer for debt relief help to determine if it’s legitimate. Consumers should look critically at the information they find about an individual or organization that offers to settle their debt and not dismiss potential warning signs that indicate a scam.

If consumers encounter unfavorable reviews or scant information while researching a debt relief offer, they should look elsewhere. There are reputable debt management services, like licensed bankruptcy attorneys offering non-bankruptcy services like debt settlement and credit counseling, that can help. 

Scams aren’t the only risk of debt settlement. A positive outcome isn’t guaranteed even when consumers work with a respectable debt settlement business. 

The process of debt settlement may take years. Withholding payments to creditors during the potentially lengthy process of negotiating a debt settlement can result in missed payments. Late fees, interest charges, and other additional expenses can result. 

A consumer’s credit may suffer due to the credit bureaus reporting these payments as late. 

The consumer may face further damage to their credit and legal actions, even if their debt is reduced somewhat. The litigation and charge-offs part of the debt settlement procedure may further reduce a consumer’s credit rating. 

Given the potential adverse effects of even a successful debt settlement handled by a legitimate firm, consumers must consider all debt relief options before pursuing a settlement. 

For consumers whose credit is still strong despite their debt, debt consolidation might be a less risky option. A balance transfer credit card often allows consumers to avoid paying exorbitant interest on their transferred credit card debt during an interest-free promotional period that can last a year or longer. Suppose the consumer can pay off or at least pay down the balance before the promotional period ends and the standard annual percentage rate kicks in. In that case, they can save money and make considerable progress on getting out of debt. 

Why Having Professional Experience and Knowledge Helps Consumers Struggling With Debt

Under the law, consumers have a range of options they can use to deal with unmanageable debt. To help navigate their debt relief options, they can turn to licensed bankruptcy attorneys like the experienced Debt Advisors Law Offices team. 

We help consumers understand their rights and assess the legitimacy of offers, all while providing the one-on-one attention that will help them make informed decisions to protect their financial future. 

In Summary

Choose debt relief assistance services wisely. Debt relief scams prey on financial vulnerability, but recognizing the warning signs, seeking legal counsel, and considering alternatives to debt settlement can safeguard consumers’ financial well-being.

Contact Us at Debt Advisors

If you need expert guidance or have questions about debt relief and avoiding scams, contact Debt Advisors by phone or email. Our experienced team is here to assist you.