The reason you choose to enroll with a debt solutions company is to get out of debt. However, if you choose the wrong company your debt problems could get worse. Recently, some states have enacted laws to regulate debt solutions firms, while other states are in the process of enacting these kinds of laws. Here are 5 of the most common ways a debt solutions firm can scam you:
- Charging high fees: paying a lot of fees when you’re deep in debt doesn’t make much sense. Make sure the debt solutions firm you choose tells you in writing how much you’ll have to pay in fees throughout your debt program and make sure they keep their word.
- Making payments to a creditor late or not at all: If you’re enrolled in a debt management (consolidation) plan or a settlement plan, your debt solutions company may be making payments to your creditors on your behalf. You need to make sure that each and every payment is made to each creditor on time and for the right amount. Otherwise, you might end up in court for collections.
- Disclosing your personal information: In order to successfully complete a debt solution program you may have to disclose some of your personal information, like your social security number. You need to protect yourself from identity theft by getting a copy of the company’s privacy or confidentiality agreement. If someone at the debt solutions company steals your identity you also need to take the proper legal steps.
- Enrolling without a consultation: Never enroll with a debt solutions firm that makes promises about which debt solution is right for you, how much you will have to pay under the program, or how long the program will take without a complete picture of your finances. Any reputable debt solution firm will offer you a free debt consultation before offering you a debt program, and will protect any information you give them during the consultation.
- Not following state law: As the foreclosure crisis deepened, more and more states took action to protect their citizens not only from fraudulent mortgage solution companies, but from any credit counseling and debt solution firm that might take advantage of people. Take the time to learn all your state’s consumer protection laws.
If you choose the right debt solutions firm you will get the help you need to become debt free. If you choose the wrong one, you could end up deeper in debt and possibly dealing with identity theft as well.
Caroline Palmer is an associate attorney at the firm of Oak View Law Group. Ms. Palmer is also a member of the LawGuru Attorney Network.
This is great information. I wish I would have seen this before I went through two different companies. I started this process back in 2006 and I am still trying to pay some of the debts off. In the process I was sued by two companies and had my paycheck garnished for over a year and the debt cost me twice as much. The other company had a class action lawsuit, my bills were never paid and I only received back a small portion of what I paid them.