Warning Signs: When to Avoid a Debt Relief Company


Debt consolidation can be a smart way for consumers to get out of debt faster – and there are companies and credit agencies available to help. However, not every debt consolidation company is created equally, and there are plenty of bad ones that can lead consumers even deeper into debt or lure them into worse financial situations through steep upfront fees, bad advice, and more.

Before you take the step into debt consolidation and choose to engage a Debt Relief company to help you, do your research and look for these top warning signs. Avoid at all costs any company that is not committed 100% to help you find financial freedom.

#1: Upfront Fees

First and foremost, beware of companies that charge upfront fees for their services. Debt Relief companies should be focused solely on helping consumers become debt free. Not to mention, having to come up with the cash to pay the upfront fee can be even more stressful for many consumers, who may have been better off saving that money or putting it into their loans. Make sure you shop around to evaluate your options before settling on a particular company.

#2: Hiding The Consequences

Debt Consolidation services can have great benefits for consumers; nonetheless, pursuing many forms of debt relief, like debt settlement or credit card consolidation, can have an impact on your credit score. A debt relief company should clearly communicate this to you. If you meet with a credit counselor who deflects or even skips over the downsides to each option, be warned: There are probably other things they aren’t telling you. It is critical to seek a relationship with a company that will be forthcoming, transparent, and honest at every juncture.

#3: Inflated Promises

Remember that if something seems too good to be true, it probably is. When working with a Debt Relief company, they should be able to give you a clear plan which highlights how much the expected payoff and settlements will be on your Debt Relief plan. If you are dealing with a company that is giving you an estimate of 50% for all your creditors (which is what most irresponsible Debt Relief companies do) then look elsewhere. A legitimate Debt Relief company should be able to give you a Debt Relief plan with a specific settlement and payback amount for each creditor that they are enrolling in the Debt Relief plan and not an estimated payback of 50% to all creditors. Not all creditors settle at 50% payback, some might be at 45% while others are at 75%; therefore, a good Debt Relief company should know the payback % based on each creditor that is being enrolled in a Debt Relief program.

#4: Legal Option in dealing with Creditors

A good Debt Relief company will give you the option to have access to a legal plan which will deal with creditors in the following capacity:

  • Stop harassment: Being in a debt relief program can lead to creditors and collectors calling you asking for payments. Make sure that the Debt Relief company has the option in place for an attorney to represent you during the debt relief program to prevent collectors from harassing you while the debts are being paid off.
  • Difficult Creditors: Some creditors make it difficult for Debt Relief companies to negotiate settlements with them directly and will only negotiate a settlement with a licensed attorney. Make sure your Debt Relief company will give you access to an attorney to help deal with difficult creditors.

Avoiding a Credit Card Consolidation Scam

If you’re looking to consolidate your debts and are allured by the prospect of working with a professional, make sure you do your due diligence. There are a few key ways to ensure you protect yourself from falling into a scam and losing more money – and time – than you need to while you are trying to pay down your debts.

  • Research. Check the company’s reputation through the Better Business Bureau and see if any complaints have been filed against the company. Also, ensure they’ve been in business a while, are licensed to do business where you live, and have a team of experienced professionals.
  • Gather multiple offers. Cast a wide net. Look for consumer reviews on each company and make sure you compare their services against one another, weighing the pros and cons and looking for consistency – or lack thereof – between their fees and offerings. Pay special attention to the ways that each communicates with you.
  • Put everything in writing. When pursuing any kind of debt or credit card consolidation, it is vital to memorialize every conversation and transaction in writing. From each company you engage, make sure you ask for their terms and conditions and ensure they are clearly communicated to you. This will not only help you make a more informed decision, but will also give you a leg to stand on legally if it later turns out some of those claims were falsified or misrepresented, or if critical information was concealed.