Debt reduction scams and debt relief scams have been spreading like mildew for a while now during this painful and prolonged economic downturn. With millions in financial trouble, credit card debt is a bigger problem than ever. Predatory debt relief companies promising peace of mind are seeking out individuals drowning in debt. But with financial discipline and effort individuals can avoid even the so-called legitimate debt reduction services.
Resource for this article: Don’t fall for credit card debt relief scams, just do it yourself
Debt reduction pitfalls
To provide debt reduction services, most companies pitching these programs offer loan consolidation plans in which you take out another loan to settle existing debt. Other debt reduction services will offer to negotiate with your creditors to arrange a payoff for less than you owe. All they care about is signing you up, not whether or not their programs will really work. An significant thing to realize is that paying less than you owe is listed on your credit report as failure to pay in full, which damages your credit score.
Debt management misrepresentation
That financial predators sell themselves as legitimate companies with the ability to help consumers overwhelmed by credit card debt is no secret. The Government Accountability Office, as reported by the Los Angeles Times, sent investigators posing as financially distressed consumers to certain debt management companies. The companies gave them wildly exaggerated descriptions of the firms’ success rates and sometimes promised savings of as much as 50 cents on the dollar.
Duped by debt reduction
Big upfront fees—as much as several 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 business that she would save enough with lower interest rates to pay down credit cards, a mortgage and a car loan five times faster. She was assured that for $ 499 she would save $ 2,500, and savings from lower interest rates within the first 30 days would a lot more than cover the fee. No interest rates were reduced, the company would not refund the $ 499 fee as they promised and also the Federal Trade Commission sued the firm.
The latest debt relief trick
Claiming "government approval is a common angle pursued by debt relief scam artists today. Statements made by debt management business representatives as reported within the Los Angeles Times article, also as their advertising, has shown the companies attempt to portray themselves as partners in a government program resembling the recent bank bailout. 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”.
Self reliance is the best debt relief
There are hundreds of debt reduction and debt relief companies infesting the Internet, but there is no government-backed credit card debt relief program. Debt relief has become a huge industry designed to kick individuals when they’re down. Getting on a budget that allows you to pay your bills on time and pay down your debt is still the best route to debt relief. People don't need a debt management business to negotiate with creditors or refinance loans when they can do it themselves.
Debt relief advice you can trust
The National Foundation for Credit Counseling is a good place to start if you need help with debt difficulties. Anybody who needs free and confidential advice about debt relief can get it from this non-profit community group. The NFCC offers consulting in person or by phone. Take a look at nfcc.org to discover a counselor as part of your area.
Read a lot more on this topic here
Los Angeles Times
latimes.com
MSNBC
msnbc.msn.com
NFCC
nfcc.org
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