Consumers seeking debt-relief call toll-free numbers featured in ads and sign up for programs solicited by telemarketers. In some cases, consumers pay hundreds in advance fees, but receive little to no assistance and end up even deeper in debt.
Red Flags: Be wary of any company that:
- Uses a generic name to make it difficult for consumers to research them; or refuses to provide basic information on its location, length of time in business, affiliated companies, etc.
- Wants payment or financial information before providing any services or a contract.
- Advises against staying in contact with creditors, lenders, or the three major credit reporting agencies directly.
- Embellishes its "success rate," without proof; and claims you can dispel all negative credit information from your credit report, regardless of its accuracy.
BBB Tips: Beware of offers that sound too good to be true. Remember, debt doesn't disappear overnight, so be cautious of companies making inflated or unsubstantiated claims and guarantees.
understand the differences between debt consolidation, debt negotiation and debt elimination offers. Although some offers are legitimate; offers concerning debt "elimination" are almost always scams.
- Verify legitimacy of unknown debt calls. Ask debt collectors to provide official documentation to substantiate debt. If contacted unexpectedly by a debt collector or debt help company, do not provide or confirm any bank account, credit card or other personal information over the phone until confirming the legitimacy of the call.
- Understand debt help terms. Those who receive solicitations for debt help should
Don't rely on the "middle-man." Beware of referral service companies that promise to connect you to a credit repair specialist for an upfront fee. Instead, personally contact lenders or financial institutions to discuss options.
Stay in contact with lenders. If having trouble with payments, try to work out a plan with lenders first before enlisting outside help. Even if you gain third-party debt help, stay in touch with lenders.
Try a credit counseling service first. Most credit counseling agencies are nonprofits that offer financial guidance for a small fee or for free. When searching, see if they're registered with the National Foundation of Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCA).
Research debt help companies. Before getting assistance, get a free BBB Reliability Report on the company a www.bbb.org. Get details on services and fees in writing. Understand plans and if they will negatively or positively affect credit scores. Check for proper licensing with state agencies.
Get all details in writing. Don't rely on verbal promises. Understand exactly what services will be provided. Know what the fees and interest rates are.
Utilize BBB's Managing Credit – Made Simpler. This free online program walks consumers through steps to better manage their credit, regardless of their financial situations. Visit www.bbb.org/credit-management.
Know Your Rights, Get the Facts:
Fair Credit Reporting Act (FCRA), consumers are entitled to a free credit report every 12 months and have the right to dispute inaccuracies on their own. Click here for more information.
Avoid companies that don't explain your rights. Under the Credit Repair Organizations Act (CROA), credit repair companies should supply a copy of the "Consumer Credit File Rights Under State and Federal Law" before a contract.
Don't spend money on services not rendered. According to the CROA, credit repair companies cannot require payment until services are completed, as promised.
Report Scams: Victims of credit repair or debt relief schemes can file complaints with the:
Federal Trade Commission at www.ftc.gov.
State Attorney General’s Office and other local consumer affairs agencies: Oregon Department of Consumer and Business Services.
Better Business Bureau at www.bbb.org.
Additional Tips, Articles and Resources:
Credit Repair: How to Help Yourself
Understand Offers to Reduce Debt
Money Matters: Dealing with Debt
FAQs For Consumers About Debt Management Companies
Phony Debt Relief Calls
Complaints to BBB Against Debt Settlement Companies On The Rise
FTC Issues Final Rule to Protect Consumers in Credit Card Debt