Debt Relief Scams

During the economic recession of 2007-09 several people found themselves facing financial problems. A genuine problem that many people suffered from, was, that they lost their sources (or rate of income as a result of wage cut). Apart from the loss of income, several people had borrowed a large volume of loans and had also used a number of credit cards. There are several factors that led to such a situation. Some of the genuine reasons were the subprime and the irrational rates and APR that were levied by the credit card customers. Services such as debt management services, debt negotiation and debt relief services negotiate with the lenders, credit card companies and debt collection agencies in order to reduce a partial part of debt and receive quick and payments. There were however cases where scams were reported.

About Debt Relief

Debt relief or debt reduction or debt negotiation all mean the same. The program that is offered by debt relief company or debt reduction companies, is simple and it principally aims at reduction of total amount of debt, that the consumer owes to lenders and credit card providers. This is done through processes such as debt negotiation and debt settlement. In some cases, such companies also undertake debt management or credit counseling services. Against all these services, the debt relief consultancy companies and agencies charged their customers some commission (a requisite percentage of the amount of debt that they relieved) or charged a particular fee per month or a lump sum amount.

Debt Relief Scams

The debt relief companies in their marquees and advertisements usually claimed to get rid of an amount of debt for a fee. However this was always not the case and, in several cases, the consumers faced a disaster as a result of these claims. Here are some of the genuine problems that the consumers faced:

• The first problem was that the debt relief companies promised to get rid of 'up to' 50% of a consumer's debt. However this was always not possible and there were situations where the consumers ended up paying unnecessary charges.
• The service providers often charged hidden costs and commissions. It basically means that the agreement between agencies and consumers contained complex depiction of some costs. These costs would be usually depicted in small font or in complex statements.
• In some cases the agreement would be very translucent and would contain an (*) asterisk saying that 'conditions applied for debt relief'. The conditions would never be mentioned.
• Another prominent problem was that the consumers were never aware of the effects of debt reduction on their credit reports and score. Post the debt relief process the credit score would get decreased, drastically.

The end result was that consumers would have to pay excessively or for costs that they were totally unaware of.

Scams about Credit Card Debt Relief

The false credit card debt relief plans were more dangerous because the credit card companies would ensure that the consumer's credit report would be affected. Apart from that, the credit card companies would slap quite unexpected and heavy fines on the consumers. The end result was the same, consumers had to pay through their nose, first for the service and then for the credit card company's fine.

How to Avoid Fraudulent Debt Relief Companies

The Federal trade commission which is well aware of such scams is keen on cracking down on such providers, in order to protect the consumes. In order to initiate consumer awareness, the commission has issued some tips for avoiding bogus debt relief service providers. The commission advises all consumers to check upon the companies status by approaching authorities and agencies such as state Attorney General, consumer protection agency and the Better Business Bureau. Apart from that, one can also try the successful and cooperative U.S. Cooperative Extension Service. Apart from that, the commission also recommend what your agreement should depict and what services are you eligible for. You can find the information on the commission's website.

Personally, I feel that do-it-yourself is the best option that one can use. The merit is that at least you are aware of what you are doing. When facing a debt it is natural to be eager to get out of the financial mess. But be sure that you avail of a service that genuinely helps you and doesn't push you further down the debt drain. Compare prices and information of services and then make an informed decision.