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Spotting Deceitful Debt Relief Agencies

Many fraudulent debt relief agencies try to rope consumers in by promising to erase, eliminate or drastically reduce their credit instantly. While this sounds great on paper, it’s not realistic—or legal.

Here are a few warning signs to help you spot deceptive debt relief programs:

  • Upfront fees – Some debt relief agencies require upfront payment before they can begin their services. While fees are normal, it’s important that you know what kinds of services are being provided and what you’re actually paying for. Legitimate agencies will never require you to pay everything up front.
  • Expensive Membership/Monthly Fees – Most credit counseling agencies charge membership/monthly fees to cover costs associated with handling your creditors. While this is normal, be suspicious of any agency charging more than $75 for membership or over $55 in monthly fees.
  • Keeping the First Payment – Rather than paying your creditors, the debt relief agency might keep your first payment as a type of collateral. While this practice is not illegal (as long as it doesn’t exceed your state’s maximum allowable origination fee – usually between $35 and $75), it does represent an excessive fee. In addition, this practice further delays your freedom from debt by putting you another 30 days behind on your payments, which is proof the agency prioritizes its own interests above your own.

Advance-fee Loans

Advance-fee loans lure in consumers by promising a “guaranteed” loan. When the consumer calls, the scammer gathers their personal information (driver’s licenses, employment records, Social Security numbers, etc.) in order to complete the “application”.

A few days later, the “lender” will call and advise the consumer that they are accepted but that before they can continue processing the loan, the consumer must do one of the following:

  • Purchase Lending Insurance
  • Pay for Processing Fee
  • Make an Advance Payment for the Loan (often 3 months of payments are required)

Real debt relief is possible through hard work and dedication, not through credit scams. Now that you know the warning signs for common credit scams, you can take the necessary steps to avoid them.

For more information on credit scams, or for more information on our nonprofit debt consolidation services, contact us online by filling out the form above, or call CreditGuard of America at 1-800-500-6489.

Also see:

Beware of Credit Card Scams

Why We Hate “Credit Repair”

Consumer Credit Laws and Your Credit Rights

Why You Should Avoid Payday Loans