Up until last year, debt settlement scams were rampant, which is why the Federal government amended laws for most companies that provide debt relief services. Just because laws were amended doesn’t mean every company out there will follow them. Some companies look for loopholes or disregard the law completely. So it’s important that you do what you can to protect yourself from being ripped off.
Don’t pay upfront. Most companies running scams want to get as much money from you upfront as possible without providing any services. This is why the amended law prohibits most companies from collecting a payment upfront. Some companies have a lawyer front and tell you that you have to pay attorney fees, but sometimes this is a scam too. The rule of thumb you should follow is that you shouldn’t pay for a company’s services until they’ve actually provided the service.
Check with the Better Business Bureau. Research the background of any debt settlement company you’re considering. The Better Business Bureau is a great place to start because many consumers go here when they need to complain about a debt settlement scam. You should stay away from debt settlement companies that have lots of unresolved complaints from consumers.
Avoid giving out your personal information. The debt settlement firm usually only needs to know information about your debts – your creditor names, account numbers, balances owed, interest rates, etc. They typically don’t need to have your social security number or date of birth except possibly for verification purposes. Think twice before giving out this information since it can be used for identity theft. You should also avoid giving out account passwords.
Get the contract in writing. You should avoid entering an agreement with a debt settlement firm without getting a written contract that spells out the terms of the agreement. Make sure you thoroughly read and understand the contract – when you’re charged, how much you’re expected to pay, how the firm will handle your sensitive information, etc. A contract will make it easier to sue a settlement firm who violates your rights or doesn’t do what you’ve paid for.
People struggling with debt are often extremely vulnerable. Unfortunately, there are companies that would love to profit from that vulnerability. As desperate as you may be to get out of debt, you still have to be smart about how you deal with your debt. Be suspicious of any company that promises to help you and make them prove that they can be trusted to follow through on their promises.