How to Avoid Scam Debt Consolidation Services
To avoid being victimized by fraudulent debt consolidation services, you should know the warning signs of debt consolidation scams. Be wary of debt consolidation “nonprofit ads,” and shop around for the best debt consolidation program. The Internet is filled with so many debt consolidation programs and so many possibly misleading or flat out fraudulent ads that is very easy to be confused and tricked into a debt consolidation scam.
If you find yourself behind on your mortgage, behind on your credit card payments, and your mailbox full of collection notices and past due notices, debt consolidation is a good option to managing and reducing your debt load. Unlike bankruptcy, debt consolidation involves less hassle and does not severely limit your credit for several years. Debt consolidation is a great tool when dealing with multiple loans. Unfortunately, as the economy sours, scammers and fraudsters crawl out of the woodwork ready to prey on people looking for debt consolidation services to manage their recession-ravaged finances. Hopefully, this blog post will arm you with the necessary information you need to avoid forking over your already meager funds to these scams.
Know the signs of debt consolidation scams
Debt Consolidation Scam Signals
One key sign of a scam debt consolidation operation is that it tries to impersonate legitimate financial companies. This takes the form of using fragments of recognized financial service brands and mixing it with other names to avoid trademark litigation. They often use legitimate or official sounding names that involve the words “national”, “america”, “federal” or other similar words that evoke a sense of confidence. Another sign of scam companies is that they often have bad reputations among other consumers. You can easily find its by searching the Better Business Bureau or just doing a search on consumer ripoff websites. Some companies are even so bad that social networking sites like twitter feature user complaints in their databases. Regardless of which method you use, make sure you do your research. Of course, use your commonsense, some bloggers and/or competitors often use the Internet to illegally libel otherwise legitimate companies. Read the complaints carefully, look for patterns, and read between the lines to get a glimpse of the true motivations behind these complaints. Was it written by a fired employee? Is the writer obviously mentally deranged? Do his/her supporters have their own axe to grind? Don’t be fooled by elaborate online libel conspiracies. Another sign of a scam debt consolidation company is that they ask for advance fees. These fees are paid before they even consolidate your debt or negotiate your loans with your creditors. Be careful of such fee arrangements since many companies disappear or just stop corresponding with you once they receive your fees.
Beware of “non-profit” debt consolidation companies
Like the first sign of a debt consolidation scam operation using legitimate names or official sounding designations, many scam operations use a nonprofit legal structure to gain the confidence of their victims. The designation “nonprofit” does not mean that the debt consolidation company won’t charge exorbitant fees. It also doesn’t mean that they make little money with their services or are altruistic. The term “non-profit” is merely a tax designation. It doesn’t speak to the motivations or compassion of the company. Nonprofit companies, unlike profit-based companies, must discharge all of their revenues through expenses at the end of every fiscal year. They are not allowed to log a profit in their books. “Nonprofit” does not mean they forego high fees because they don’t want to make a profit. Far from it. Nonprofits can make a lot of money for their operators, it is just a question of accounting and tax laws as to how they account for “profits”.
Shop around for the best debt consolidation program
After you have filtered out your potential debt consolidation company by filtering out scammy names, designations, and researching them on the Internet for existing customer complaints, make sure you compare debt consolidation programs and packages. Make sure you are comparing apples to apples and oranges to oranges. Make sure that the service offerings of the companies you are comparing are similar or the same. It does not make sense to compare one company with differing services to another company with its own particular set of services.
Once you’ve made your selection, make sure to ask for refefrences from actual clients who used their services in the past. Ask for more than one reference. Interview them briefly over the phone. Compare their answers to other past clients to ferret out any inconsistencies so you don’t get tricked by fake references/co-conspirators.
Prepare a list of questions and ask away before submitting your personal financial information to a debt consolidation company. Make sure you are aware of their privacy policies.
Debt consolidation has many benefits, especially if you’re dealing with multiple loans. However, you have to choose the right debt consolidation program and company to avoid being scammed. Fraudulent debt consolidation programs and companies have sprouted like mushrooms, taking advantage of people who don’t know anything about consolidating debts. By knowing the signs of scam programs and by shopping around, wise consumers will have little to no chance at all of becoming victims to fraudsters.
Sources:
http://www.consumerfraudreporting.org/debtconsolidation.php
http://www.ftc.gov/opa/2008/09/ameridebt.shtm
http://www.occ.treas.gov/antifraudconsumer.htm
Related questions
How to tell fraudulent or fake debt consolidation companies
How do scam debt consolidation companies operate?
What are the signs of a debt consolidation scam?
Does nonprofit status guarantee that a debt consolidation company is not fake?
What are advance fees and why I should not pay them?