Debt Relief Rip-Offs

Piles of mounting debt can lead almost anybody to want to consolidate their bills. But is it the best idea? Scammers everywhere lead people to pay for services they never get.

The problem is, debt consolidation ads are everywhere. They all look promising, especially in a time when consumers need debt relief. For many, it's no longer the point of running up debt and not paying it. For so many people, it's losing their job and not making any money to pay the bills.

"Especially when people are desperate like they are now, the credit card companies will work with you,” said Kathy Graham of the Better Business Bureau. “Why go to the third party and have to pay that percentage for it. If they need $500 up front to fix your credit over the next 30-60 days, you could be out that $500 and get absolutely no help and your credit is trashed."

The temptation to lessen debt is a big one. Just be very leery of companies guaranteeing consolidation. The Federal Trade Commission warns it's possible the company is disguising filing for bankruptcy on your behalf or applying for a consolidation loan.

Working with a debt relief business shows unfavorably on your credit and will lower your score.
If you don't think you can negotiate with your creditors yourself, there is help.

"We do have a couple of non-profit agencies in the area that will sit down with you and help you work a plan on what to do to help you get out of the situation you're in,” said Graham. “But going to a third party, if they're asking for money up front, it needs to be a red flag that could be three months worth of payments right there."

Another negative out of the debt consolidation business is people promising to fix your credit for a fee, of course. Arthur and Quintell George of Wilmington said they were referred to a person who could fix their bad credit by a mortgage company rep.

"He was like, I'm going to give you his card, call him and he can help remove some of this stuff, this old credit off your credit report,” said Quintell George.

The problem is it's not possible or legal! There's no such thing. So of course they never received anything for their lost money.

"We waited and waited, we never heard anything,” said George. “So, I called him and I said I haven't gotten any paperwork from you, I haven't gotten a copy of any credit report, what's going on?"

Even if it seems like there's no way to pay your debt, don't fall for a scammer. Some easy warning signs to look for are:

-If they ask for money up-front or monthly fees
-Ask for personal financial information, such as credit card account numbers and balances before providing you basic information
-Try to enroll you in a debt management plan without reviewing your finances
-Don't teach you budgeting and money management skills.
-Or demand you make payments on your debt plan before creditors accepted the plan.

Consumer Reports highlights debt scams in the March 2010 issue. The report states the Consumers Union is pushing for state laws to regulate fees and claims.

The Better Business Bureau in Conway can recommend non-profits agencies to assist in debt relief. You also need to check out any company by calling the state attorney general and the BBB.

Just know, getting out of debt isn't easy and there isn't a magic pill answer. It will take time and dedication.