There’s no shortage of debt relief companies
Google search “debt relief companies” and you’ll find countless pages of results. With this many results, it’s almost certain you’ll find some bogus debt relief companies in the mix. Why is there such a demand for debt relief or debt settlement companies?
Well, the simple answer is, there’s a lot of consumers who are struggling with their debts, especially high interest debt like credit cards. According to the credit bureau Experian, the average non-mortgage debt per household is $24,706. Makes it easier to understand why so many people are seeking relief options.
Of course, this is a double-edged sword. With a huge demand, brings nefarious companies content to make a quick buck and close their doors. Without following federal regulations, these companies can’t last long. But, the damage is done for the consumers that trusted them. This is why it’s so important to research your options, and the companies offering them.
How will you ensure you’re not falling prey to a bogus debt relief company? The good news, there are many indicators for an informed consumer to look out for.
How to spot and avoid a bogus debt relief company
The following are some indicators of legitimate debt relief companies. Licensing and accreditation require complete transparency and should be the first on your list of requirements for a company. If you’re speaking to a company that doesn’t have accreditation in their given industry, tread very carefully.
Accreditation with AFCC – Debt Settlement
The American Fair Credit Council (AFCC) is the leading oversight group for the debt settlement industry. To receive AFCC accreditation, members must undergo a rigorous on-site audit. Members must follow all FTC (Federal Trade Commission) rules and regulations. Companies must also follow the AFCC code of conduct. If your debt settlement company is an accredited AFCC member, that is a good sign that the company is reputable.
NFCC compliance – Credit Counseling
The National Foundation for Credit Counseling (NFCC) is the largest financial counseling organization in the U.S. All its accredited member agencies must undergo annual operations audits. The debt-relief companies must comply with all consumer disclosure regulations. They must also be licensed, bonded, and insured.
Common tactics of bogus debt relief companies
Grandiose promises and false claims
The easiest way to spot a bogus debt relief company is to evaluate the promises they make to you. Review their website, social media, reviews, etc. A legitimate debt relief company will never offer “80% off your debt!” or “eliminate your debt in just 6 months!”. A good debt relief company will tell you honestly what they think they will save you, based on your specific situation. Keeping in mind, a consultation is an estimate.
Seasoned debt relief companies tend to underestimate the savings. Here at CFF we estimate to our clients will pay 75% of their original balances. More times than not, once the negotiations team gets on it, they save much more. The point is, we would rather tell you what we know for certain we can save you, and be pleasantly surprised when it’s even more.
A bogus debt relief company doesn’t plan on being around ten years from now, and this is why they make outrageous claims. Claiming to save you huge amounts off your debt will earn them a quick sign up based on a promise they never intended to deliver on.
Offering a debt relief savings account that’s NOT controlled by YOU
A legitimate debt relief company will never want you to hand over control of your savings account. A quick overview of the debt settlement process: A debt savings account is opened in your name. Money is deposited into this account, that upon your approval, negotiators use for the explicit purpose of settling your debts.
This account is yours. It holds your money and you should be in complete control of it. If a debt relief company asks to control your money, or have access to your funds without your permission, walk away.
Asks for partial payments before any debts are settled
Following regulations, a debt relief company cannot ask for any type of payment up front. That includes a partial payment of a debt prior to settlement. Honest debt relief companies will have their fees built in to the program, there shouldn’t really be any “extra” fees or charges. If there are, be sure to get a full explanation of what they are in writing.
Offers legal advice
A legitimate debt relief company will never offer you legal advice, as they are not attorneys. In fact, the best companies will tell you very clearly that they are not in any way lawyers. If a company does try to offer you legal advice, move on. Of course, this excludes actual attorneys that happen to be offering debt settlement services.
Here’s what the Federal Trade Commission consider indicators of bogus debt relief companies
- Charges fee upfront or before a debt settlement.
- Asks for “voluntary” contributions.
- Guarantees they can wipe out all your unsecured debts without full review of each debt.
- Does not explain the consequences of a relief program, creditor calls, credit drops, etc.
- Guarantees you will not receive any further collection calls.
- Requests information like credit card details or social security details over the phone.
Here’s what to look for in a debt relief company.
We here at CFF offer debt settlement services only, but this advice applies across all relief options. This includes credit counseling, debt management, consolidation, bankruptcy, etc. Whichever option you decide is best for you, look for these additional indicators of an honest company.
Should offer a well-planned strategy
A legitimate company will formalize a well-planned strategy for your debt, which may take some time. Any instant fix to your debt settlement issues is probably a scam. Once you’re in a program, the customer service team should be able to keep you apprised on your account standings, and program progress.
Approval of resolution by you before settling
A legitimate debt relief company will notify you of any settlements before proceeding. When a negotiator has come to an agreement, they should always review with you prior to settling.
A good debt relief company will be completely transparent about their program, and the repercussions. If you’re not getting clear answers on how the program works, how fees work, adverse effects to your credit, etc. you may want to avoid them.
Also be sure to ask about licensing, trustworthy companies ensure their debt specialists are properly trained and licensed.
There are a number of debt relief companies offering similar services. Asking the right questions and looking for key indicators is your best defense against nefarious companies. If you’re ready to kick-start the journey towards debt freedom, get a free debt settlement consultation today.
Your partner in debt relief,
Consumer First Financial