Avoiding Debt Consolidation Scams

Some people rely on debt consolidation loans to fix their debt problems, only to find that this method does not always work. There are companies who advise and make promises about debt consolidation, only to lead unsuspecting innocents into a financial pit. Take the following steps to avoid being scammed:

  • Research debt consolidation companies prior to making commitments or releasing sensitive personal information. Many will even claim non-profit status as a means of appearing more credible.
  • Be wary of companies that guarantee plans or other services prior to assessing an individual situation.
  • Contact creditors to decipher which debt consolidation companies are approved.
  • Inspect the fine print. Carefully read through agreements, contracts, and policies and procedures. Consult with a legal professional for guidance when needed.
  • Until creditors have accepted proposals from a debt consolidation company, continue making scheduled payments directly to them.
  • After beginning a program, review statements on a regular basis to ensure appropriate payments to creditors. It is also helpful to err on the side of caution and occasionally contact creditors directly to ensure they are receiving payments.
  • Illegitimate companies often charge high monthly fees for simply waiting for money to amass. These companies will also pay themselves first, meaning little impact on the actual debt.
  • Be aware of companies with little means of accountability. Signs of this include post office boxes instead of physical addresses and vague answers to questions about the companies themselves.
  • Watch out for companies that insist on automatically drawing funds from bank accounts. While the practice itself is quite common and entirely legitimate, many questionable companies may continue to withdraw money even after the debtors request that they cease.
  • Be sure the company negotiates promptly. Because debt consolidation services collect payments from creditors, they may not be eager to act quickly. In the meantime, their lack of negotiation means that debts continue to accumulate.

Contact the team at Brock & Stout for more information about debt consolidation and your legal rights.