Beware Of Debt Settlement Scams

Every day we receive a lot of emails from our readers enquiring about the truth behind debt settlement scams. It seems as fake debt settlement companies are on the rise and they are targeting the middle class American people. Every day we hear news about a new debt settlement scam. Considering the present condition of the economy, we are going to see more and more of such fake debt settlement firms that dupe their customers with fake promises and unrealistic services.

A lot of these fraud debt settlement firms offer settlement programs that are just too good to be true. From the previous cases of fraud, it can be noted that most of the fraud companies promise their clients to reduce their debts by 30 to 60 percent of what was owed originally. Most of these companies ask for upfront fee for such unrealistic but lucrative settlement programs.

With a little bit of discretion on your part, you can easily save yourself from such scams. You must always avoid signing up for debt settlement programs if the company:

  • Asks for fees before any actual services have been provided. It is a common practice of fraudulent debt settlement firms to ask for upfront fees before they have even begun to negotiate your debt. Such companies never intend to fulfill their promises and vanish in thin air as soon as you pay them.

The Federal Trade Commission (FTC) has issued specific guidelines prohibiting debt relief companies to collect any fees before the debt has been renegotiated or the settlement has been finalized.

  • Guarantees that it can make your debt go away without any complications whatsoever. Please note that your creditor is under no obligation to even consider the negotiating process let alone reach a settlement. Your creditor can say no to the negotiating process without any legal consequences. Hence, no debt relief company in this world can guarantee that your debt will be renegotiated or reduced at all costs.
  • Promises that it can stop the creditor from filing a law suit against you. Same as the above point, your creditor is free to pursue any legal means he deems necessary in order to collect the debt from you. There are no legal barriers that can stop your creditors from filing a lawsuit against you if you fail to make payments.
  • Fails to explain the risks associated with the negotiating process. A lot of these fraudulent debt settlement companies fail to explain the risks associated in case of a failed negotiation. They also hide the information regarding the escrow accounts.
  • Fails to explain the unreasonably high costs regarding the settlement process. Always remember to ask the debt relief company about the unusually high premiums that you are supposed to pay for their services. Also make sure that the fee demanded by the Debt Settlement Company is proportional to the debt reduced.

Also ask the customer care executive about the scenario where you are not able to deposit the monthly payment in the escrow account.

Paul Ritz is an associate at National Debt Relief, a BBB accredited business that has helped thousands of Americans resolve credit card debt problems. Consumers can take advantage of a free debt consolidation session to discover their options for debt relief with no obligation.