Debt relief scams are quickly becoming the straw that “broke” the camel’s back. After a steady stream of reports from severely swindled consumers, state attorney generals and the FTC are taking legal action against these sham outfits (Allegro, Hess Kennedy). Here’s how to avoid joining the ranks of the disenfranchised.

Most of these debt settlement scams make the same four promises with these exact words: lower or eliminate interest rates, lower payments, stop harassing collection calls, maintain or restore credit rating. The absurd phrase “eliminate interest rates” should make you laugh out loud. If it didn’t, you may be desperately in debt and have your guard lowered – which is precisely what these companies look for in a potential victim.

They’ll promise to consolidate your debt in under half an hour or negotiate a lump-sum payment to reduce your debt by 50-70%. They’ll gain your confidence by claiming to be a non-profit organization accredited with the Better Business Bureau – and hope you don’t execute a simple BBB website consumer search. Either it isn’t listed or it is, but has multiple entries with some defunct and others with low scores.

Once they’ve established their “legitimacy,” they set their sights on a new goal: fees. They charge you a hefty up-front fee and smooth over your protests by reasoning that the money you’ll save through debt reduction will MORE than pay you back. At this point, if they can continue to charge you a monthly fee, all the better for them. If not, they’ll get another distressed person in debt to pony up an upfront fee and continue until all the money that should have gone to paying off debt is squarely in their pockets.

No matter how dangerous your situation, don’t give in. Head to the National Foundation for Credit Counseling to find a local counselor who honestly wants to help. You can schedule a meeting and work to develop a personalized plan that will put you on the difficult but rewarding path to debt freedom – instead of the too-good-to-be-true quick fix that leaves you even further in the red.

Stewart Pelto

Stewart Pelto

Stewart Pelto is a recent graduate from the University of North Carolina at Chapel Hill. He is now the proud recipient of a Master’s degree in French Literature – a degree that honed the same researching and writing skills he uses to write informative articles today. While pursuing this degree, he taught French courses to undergraduate students for two years. What he enjoyed most about the position was the challenge of making difficult concepts readily understandable and accessible to all.

He served as a Senator for the Graduate and Professional Student Federation, fighting to keep tuition costs down for graduate students struggling with their finances and student loans. He also developed his budgeting skills during his time as a Treasurer for the Graduate Romance Association. He enjoyed becoming more active in his local community and working to make a positive effect on his surroundings.

While an undergraduate himself, he spent a year abroad in Europe earning his degree in Spanish and French. While studying in both Sevilla, Spain, and Montpellier, France, he was exposed to the everyday reality of living under different economic and financial systems. Among other interesting travels he has made is a financial pilgrimage to the Spanish stock market in Madrid.

Stewart Pelto brings his rigorous academic education and his international experience to the problem of raising credit awareness and promoting financial responsibility. He hopes that his articles will teach his readers about debt and credit in an easily accessible and readily understandable way.
Stewart Pelto