Debt Relief Scams

by | Jul 22, 2022 | Scams

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The sheer amount of brainstorming taking place among the country’s scam artists is itself a climate emergency. There’s one variety of scam that I find particularly cynical: debt relief companies that have a whole playbook full of ways to separate desperate people from their money.

The preliminary step in determining if a debt relief or consolidation company is a scam is pretty simple: Beware of any company that contacts you first, and be suspicious of any company that has up-front fees.

This general advice applies to the surprisingly diverse selection of scams out there that target all demographics, including mortgage holders and college students. So many of these services have similar-sounding names, but there are very important differences between them.  

  • Credit Counseling: The idea behind credit counseling is to create a debt management plan that lumps all of your debts into a single monthly payment — often at a lower interest rate. 
  • Debt Consolidation: This kind of service helps you take out a new line of credit that pays off your existing debts — the consolidation — and you make a single monthly payment. When utilized before any missed payments, it can help limit any damage to your credit score.
  • Debt Settlement: Debt settlement typically means stopping all payments to your creditors, and instead putting those monthly payments into a savings account. Once you have enough money in the account, the debt settlement company can contact the creditor and negotiate a lump sum payoff of your debt, often for a much lower amount. Someone choosing this route will necessarily have to miss payments, potentially subjecting them to increased collection efforts.

To drive home the point of how diverse and specialized scam artists are, the Federal Trade Commission has a regularly updated website detailing the cases they have done — like credit counselors who lied to consumers about where their payments went.

If you need help deciding how to attack your debt, contact us to see if we can help — or at least give you a great referral.