With many Americans still weighed down by debt, there seem to be an endless number of firms out there offering to help save people from the quicksand. Alas, not all of these people are completely on the up-and-up.
The Federal Trade Commission is trying to crack down on debt relief services that mislead customers with unsubstantiated or false claims and are really just out to put consumers deeper into the hole.
For example, the agency just announced a $3.3 million settlement with FDN Solutions, doing business as Everest Debt Solutions, 1800debtsettlement.com, and everestdebtrelief.com, for airing fake testimonials and for not telling customers that 30% of whatever they saved was to be paid out in fees.
Thus, the FTC has put together five warning signs to look out for when trying to decide whether to go with a debt relief firm.
The FTC says to stay away from any company that:
1. promises that unsecured debts can be paid off for pennies on the dollar. The truth is that there is no guarantee that any creditor will accept partial payment of a legitimate debt. Your best bet always is to contact your creditor directly and as soon as you are having problems making payments.
2. requires substantial monthly service fees and demands payment of a percentage of what they’ve supposedly saved you. The truth is that most debt relief companies charge hefty fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee – a percentage of the money you’ve supposedly saved.
3. tells you to stop making payments to or communicating with your creditors. The truth is that if you stop making payments on a credit card, expect late fees and interest to be added to the amount you owe each month. If you exceed your credit limit, expect additional fees and charges to be added. Your credit score also will be hurt by not making payments.
4. claims that creditors never sue people for not paying their unsecured debts. The truth is that creditors may have the right to sue you to recover the money you owe. And sometimes, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.
5. claims that they can remove accurate negative information from your credit report. The truth is that no company or person can remove negative information from your credit report that is accurate and timely. It’s illegal.