The ads are everywhere. It’s hard to miss the messages from companies making big promises to help consumers wipe out their debt. They’re on the radio; in the subway; on TV into the wee hours of the morning. Unfortunately, too often, these companies are far from legitimate and are content to prey on consumers and put them in worse financial situations.
As part of the Federal Trade Commission's (FTC) National Consumer Protection Week, Clarifi offers advice on avoiding questionable debt relief services and where to find trusted help.
Cracking Down on a Debt Settlement Company
This week, the FTC reached a settlement with Texas-based debt settlement company United Debt Counselors LLC for allegedly misleading consumers and charging illegal advanced fees. As part of the settlement, the FTC slapped the company with a $9 million judgement that represents the alleged harm to consumers.
According to the FTC, United Debt Counselors (also known as United Debt Services LLC) exaggerated how much it could help customers save. They targeted up to 100,000 consumers a week with direct mail ads (that looked like official documents from a bank or attorney) claiming typical customers could cut their debt in half and be debt free in 36 months. Customers were also charged advance fees before any debt savings were negotiated.
The complaint notes that fewer than half of customers who bought services completed their program and even fewer were debt free after 36 months.
Where to Find Reputable Debt Help
With so many companies out there and so many unfair practices and scams, who do you trust? The bottom line: you always want to work with an accredited, nonprofit credit counseling agency. These good players are not out to make money—they’re here to help consumers to pay down their debt. Period.
At Clarifi, we truly care about our clients and want what’s financially best for them. It’s why we open our doors every day. Here’s more advice on getting reputable help with your debt.
Know who you’re dealing with. Before working with a company or agency to help you repay your debt, do a little research on them. Are they accredited and do they have certified employees? Do they have physical locations? Are they a nonprofit? What is their BBB rating?
Find out about fees. If a company tries to charge exorbitant fees (more than $100) for debt or other help, that’s a red flag. Comprehensive debt help usually comes with a fee, but it should be modest. Clarifi’s debt management plan (DMP) has a one-time $50 fee and a $10 monthly fee per creditor to cover administrative costs.
Hold your debt help organization accountable. In many cases, unscrupulous debt relief companies string consumers along, leading them to think they’re working hard to reduce a consumer’s debt. In reality, they may be doing next to nothing. Check in with your service provider organization and your creditor to make sure they’re communicating and making progress. Also be sure to get information including any terms of debt repayment in writing.
Beware of the term ‘credit repair.’ If you have significant debt or are delinquent on it, your credit can be directly affected, which is why many debt relief companies also say they can help you ‘repair’ your credit. But you want to be cautious about this kind of help. Often, these companies promise more than they deliver and may even further damage your credit.
If information in your credit report is accurate, there’s usually little you can do about it. However, credit counseling agencies can help you dispute errors on your credit report and review money habits that can help you improve your credit gradually.
Avoid quick fixes. We get it. It’s easy to feel overwhelmed when you’re struggling with debt. And it may also be tempting to work with the companies promising they can work miracles. Unfortunately, these companies often do more harm than good. There really is no magic wand to help you reduce your debt or improve your credit; these are things you need to work at over time. And certified credit counselors can make the process a lot less daunting.
Reach Out for Debt Relief Help
It’s okay. Money can be a sensitive subject. Many of us don’t want to talk about it with another person, much less get help for it. But there’s no shame in doing it. People from all walks of life, from all income levels may need guidance with their debt at some point. What you don’t want to do is ignore the problem and have it continue to get worse. You’ll feel much better when you address your debt head on and take action.
In the Greater Philadelphia Area, Clarifi has been helping consumers reduce debt for over 50 years. In 2016 alone, Clarifi and our Financial Empowerment Centers helped consumers reduce debt by nearly $8 million. And across the country, there are a number of similar nonprofit agencies offering trusted help.
To start getting debt help from the Clarifi Team, schedule an appointment online or call 800-989-2227.