Are you struggling to pay your credit card bills and other debts? This can make you feel anxious. So, you might feel relieved when someone calls and promises to get rid of your debt. Unfortunately, this could be a scam.
Scammers often target people who are trying to fix their finances. They ask for large upfront fees and promise to magically make your debt disappear. But the only thing that will end up vanishing is your hard-earned cash.
Here, we offer tips to help you spot a debt relief scam. This way, you can avoid becoming a victim.
What Is a Debt Relief Scam?
Debt relief scams target people with money problems, especially with credit card bills. These scams often falsely promise to settle or lower your debt. But a scammer might demand that you pay a large fee first. Once you’ve paid it, you’ll quickly stop hearing from them. This leaves you in even more debt than you were in the first place!
How Can You Spot a Debt Relief Scam?
To avoid falling for a scam, watch for these five red flags:
Red Flag #1: The “Debt Relief Business” Contacted You First
If someone calls or emails you out of nowhere and claims to be from a debt relief company, it could be a scam. Most real companies will not contact you unless you contacted them first. So, do some research and be careful.
Red Flag #2: The “Debt Relief Business” Demands an Upfront Fee
If someone offers to help with your debt but insists you pay a fee first, hang up right away. This is a scam.
A real debt relief company should never ask for upfront fees. Federal rules say that a for-profit debt relief company cannot collect fees before helping you.
Before a debt relief agency can legally charge a fee, they must first:
- Change the terms of at least one of your debts
- Get your signature on the debt relief agreement
- Make at least one payment to a creditor
Red Flag #3: The “Debt Relief Business” Applies Pressure
Be careful if you are told that you only have a short time, like 24 hours, to decide if you want to join a debt relief program. Scammers use this trick to make you decide quickly. This can lead to a bad decision, and you could get ripped off.
Red Flag #4: The “Debt Relief Business” Makes Big Promises
The Better Business Bureau says to be careful if someone offers to remove bad information from your credit report (like a bankruptcy or late payment). This is a sign of a possible scam. Also, be suspicious if someone promises they can improve your credit score or make your debt disappear. No company can really do these things.
Watch out for these statements:
- “Get out of debt today!”
- “Totally repair your credit!”
- “Live debt-free without changing your lifestyle!”
Red Flag #5: The “Debt Relief Business” Holds Back Information
Federal rules say that a debt relief company must give you certain information if you are thinking about using their services. If someone doesn’t want to tell you how long the program will last, how much it will cost, and what the credit and legal results are, they’re likely a scammer.
How Can You Avoid Debt Relief Scams?
There are steps you can take to avoid debt relief scams:
- Don’t pay any upfront fees. A debt relief company shouldn’t ask for payment until after they have started helping you.
- Get all agreements in writing. Make sure you understand what you’re signing. Don’t be afraid to ask questions, and don’t work with a company that won’t answer them.
- Do your homework. Check with the Better Business Bureau or your state attorney general’s office to see if the “debt relief business” is real. Don’t only trust the information on the business’ website.
- Ask questions. Ask the business about the fees they charge, what to expect, and other details of their debt relief program.
- Think about other options. Professional debt relief isn’t your only option. You could also try calling your creditors directly or working with a nonprofit credit counselor.
How Do You Find a Reputable Debt Relief Company?
There are trustworthy debt relief companies out there. Here are four tips to find a company that will do right by you:
- Look for a company that doesn’t promise a certain result. A real company will not make promises about lowering or getting rid of your debts.
- Find a company that doesn’t ask for a fee upfront. Federal rules say that a real company can only charge a fee after they have started helping you.
- Find a company that answers questions. A real company will give you clear, honest answers. They might even tell you what questions you should ask.
- Check out the company. Look online for Better Business Bureau ratings and online reviews or complaints about any debt relief company you’re thinking about using.
There are scammers who want to take your money. But if you do your homework, you can find a good debt relief company that wants to help you pay off debt the right way.
