Televisions and e-mail in-boxes have been flooded with ads for debt consolidation loans and debt relief. In order to crack down on fraudulent practices, the government has enacted stiffer regulation on debt consolidation services. Consumers should make sure they aren’t putting instant cash into the wrong hands.
FTC cracks down on debt relief fraud
As the Great Recession began, companies began springing up all over the place, offering fast debt relief and debt consolidation loans. All a customer had to do was hand over an upfront fee and make monthly payments, and their debt would be gone before they knew it. A lot of these companies turned out to be taking a cash advance for services that were never rendered. After a lot of complaints to the Federal Trade Commission, new rules were imposed in late October. However, abuses have continued, and attorneys general in several states have been filing suits against the impostors. A common scam is to ask for some money now for a retainer and say a staff attorney will get a person the debt settlement relief he or she needs, according to the Financial Times. Then, the “company” pockets the cash and never settles a thing.
Be careful with debt relief programs
If something seems too good to be true, it usually is. If a person is thinking about consolidating debt through an agency, there are a few things to watch out for. If a company asks for an upfront fee for debt consolidation, it’s probably a scam. There are plenty of non-profits out there that help people with debt management. Always check out a potential debt settlement company with the Better Business Bureau and the National Association of Financial Advisors.
Things you can do in the meantime
If you’re trying to get rid of debt like personal loans, installment loans, or credit cards, there are always things that can be done. Some creative budgeting always helps or payday loans if a buffer is needed.