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Credit Counseling Scams
By: Chris McElroy And Jennifer Tarzian
Some of the worst scams involve offers to help consumers fix their credit. Our
nation is so entrenched in the use of credit, it is inevitable that many will
get behind on their payments. This common malady affects at least one person you
know if not you, personally.
Credit card companies, banks, stockbrokers, stores, and other financial
institutions make it sound so easy, who could resist. No interest! No payments
until July! No annual fee! Just fill in this form and you can buy all the things
you really can’t afford!
We are sucked into this system easily, but getting out of debt can be extremely
difficult and stressful. The promises of all these credit providers become
insults and threats as soon as you cannot pay for all the things they promised
you could have when you filled out that form.
Many people do not know how to get caught up. Their situation may have changed
since they applied for the credit and ran the bill up. They may have lost a job,
had a baby, had an illness in the family, or had some other disaster strike
which meant they could not make payments they had once agreed to.
The credit providers don’t offer much help. They offered you the credit. Now
they want their money. They didn’t worry about whether they were giving you more
credit than you could really afford. It’s not their problem. It’s your problem.
Then, here you are. You owe them money. The collectors are calling and sending
you notices threatening to take your house, your car, or ruin your credit
rating. They tell you that if you do not pay there will be dire consequences.
Then you see the ad or find the website that says, “Credit Counseling. Let us
help you get out of debt and get those bill collectors off your back for you.”
You’re saved! Look, it’s even a not for profit organization. They are just there
to help me. Where do I sign?
That’s where the trouble begins. Many companies have gotten into this lucrative
venture and prey on people who are stressed out and have nowhere to turn. The
credit card companies who recruited them so vigorously before have now abandoned
them. The government isn’t offering to help. The IRS still wants their taxes.
And now the knight in shining armor, the credit counseling service comes to the
rescue.
The ad may say “Consolidate your bills into one low monthly payment”, “No
Borrowing”, “Use federal law to keep your property from being foreclosed by
creditors”, “Wipe out your debts”, “Stop Garnishments”, “Stop Collectors from
harassing you”, “Keep your property from being repossessed”, or other equally
great sounding phrases that looks just exactly like what you need.
But, don’t get sucked in a second time. If you think the credit card companies
sucked you into debt, you haven’t seen anything yet compared to what a
disreputable credit counseling company can do to you.
Some of these companies offer to help you eliminate your debt altogether. If you
get an email like that, delete it. If you find a website that says that, hit the
back button and go somewhere else. Do not walk, run!
Sometimes, the best answer is to negotiate directly with the creditor. Be firm.
Tell them what you can actually afford to pay. Do not promise more than you can
deliver. They really have to take what you can actually pay if they want you to
pay them off eventually. Avoiding them doesn’t work.
Many of these scams do not tell you what they actually charge and their fees can
be worse than what you already owe. These companies will try to avoid giving you
straight answers to your questions about their fees and have hidden costs they
may not disclose at all. They know you turned to them because you are afraid
your credit is about to be ruined and that they can pressure you into paying
them later.
They also don’t tell you they are receiving a portion of whatever payments you
are making to your creditors through them. That’s one of the ways they hide what
they make from you.
Some of them will take the payments from you, then not pay your creditors with
it on time, or in some cases not pay your creditors at all.
Never pay a credit counseling service an up-front fee to fix your credit or give
you counseling or anything else. Many of these companies are only in place to
make money from collecting that fee and never provide you with any credit
counseling or other services at all. They’ve made their money and gone on to the
next victim.
Many credit counseling scams are under investigation by the Federal Trade
Commission and those claiming to be nonprofit are being investigated by the
Internal Revenue Service and their nonprofit status is in danger of being
revoked.
However, our government agencies will not save you. These unscrupulous credit
counseling services will change their business names and be right back in
business bilking consumers in no time at all as long as there is a buck to be
made. Only your common sense can keep you from being ripped off by credit
counseling scams.
Check them out with the Better Business Bureau. Search their company name online
to find others who have used their service. Do not believe testimonials that
appear on their own website or ones they send you in an email. They can just
make those up.
If they have a website, go to http://www.betterwhois.com and type in the domain
name to find out who the Registrant of the domain name is. Then search for their
name on the web. Search their phone number or address on the web. Find out all
you can about them before you sign up for anything. Ask a lot of questions.
I hope this article has been helpful to you. Do a search in your favorite search
engine for credit counseling scams and you can learn even more about how to
avoid becoming a victim.
About the Author:
For more information about credit, go to http://creditcards.youngparentsmagazine.com
Jennifer also has great information at www.youngparentsmagazine.com for young parents. Chris McElroy has been an advocate for consumer rights on the Internet since 1995 and also runs a missing children’s organization at www.kidsearchnetwork.org. |
