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Credit Card Debt Relief Progams: Saviors Or Scam Artists?

Have you seen the credit card debt relief commercials on television?  They offer to negotiate lower interest rates with your creditors, lower monthly payment and even offer to make the loan payments for you.  A growing number of credit consolidation companies across the country claim they can do this by either lowering your interest rate or reducing the amount you owe.

This sounds like welcome relief to a person that is struggling under a mountain of debt.

However, the truth is that many of these credit card consolidation programs are scams.  You could lose hundreds of dollars and find yourself in worse off. In the end, you will owe just about as much as you owed before with additional late fees and other penalties.

Debt Relief Scams

In the last few years, the Federal Trade Commission has sued more than dozen debt relief companies because they simply lie to their clients..

Non Profit Or Not? Some counseling services claim to be non-profit when they are actually a for-profit company. The non-profit pitch can make a potential client feel confident about signing up for the service. In fact, these companies are just preying on unwary consumers.

Hidden Fees And Charges? Some of these debt consolidators mislead people about their charges.  They represent that there is just a small fee or no fees.  Sometimes, they don’t mention the subject altogether.  In reality, with the fees, the effective interest rate is higher than the worst debt consolidation loan on the market.

Debt Settlement Programs

Some companies now offer a debt settlement program wherein the companies represent that they can negotiate a debt settlement with your creditors and reduce the amount that you owe by 60% or more.  They argue that, by performing this service for you, they can dramatically reduce your monthly payments.  However, this is practically impossible to actually do.  Consumer advocates strongly recommend against using any type of debt settlement program.  They do not deliver what they promise.

Credit card debt relief scam artists have burned many of their “clients.”  Everyone “qualifies” for the debt relief scam because the companies charge a large, non-refundable, up-front fee.  They want to sign you up, collect the fee, and hope that you will not complete the program.  The end result is that someone who is struggling with debt is now left with no real ability to get out of debt.

Credit Counselors Are A Better Choice

A legitimate credit counselor will tell you up front that there is no “cookie cutter” credit card debt help solution for everyone.  Instead, they will meet with you to give you a free and objective assessment of your financial situation as well as the steps that will be necessary to pay off credit cards.  A legitimate credit counselor might recommend debt management to 1 in 5 clients.  The rest are taught fundamentals of budgeting, saving and how to become debt free on their own.

For those that need to consolidate credit card debt, the credit counseling agency will develop a customized plan and help you get out of debt within 60 months.  You make one payment to the agency and the agency pays all of your creditors.

Think Before Using A Credit Card Debt Relief Company

It is true that struggling under a mountain of debt is frightening, but your finances are much too serious to make decisions based upon a radio or television advertising pitch.  You want to find an organization that will design debt solutions specifically for you.

Instead you need to shop around and do your homework.

Initial Meeting. The credit counselor should spend an hour meeting with you to learn about your financial situation.  If they don’t, keep shopping.

Ask Questions. The counselor should ask you a lot of questions and expect you to do the same.

Discuss Fees. As far as fees, the setup fee should not be more than $50 and the monthly maintenance fees should not exceed $25.  If the agency avoids the subject of fees, keep shopping.\

Verify Non-Profit Status. Even though the agency claims to be non-profit, verify that fact with the Better Business Bureau or your local consumer advocate office.

If you do some research and shop around, you will be able to find a credit counseling service that will help you get out of debt without charging you an arm and a leg.  Beware of the pitfalls and scam artists and find a credit counseling agency that is right for you.

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