How to Avoid Credit Card Relief Scams

Most people scoff at hearing they can work from home and become billionaires. Many will laugh at the idea of a magic pill, which can make you look like a model in 24 hours. But when they hear that a debt relief program will wipe out their debts, they wonder if this is possible.

With the global financial crisis and rising unemployment, many people have accumulated large amounts of debt and are behind on credit card payments. This creates a receptive audience for debt settlement companies and their services. However, some programs can make your debt crisis worse much like you can gain weight after being on a new diet.

A lawsuit in Canada’s southern neighbor, brought by Florida’s Attorney Bill McCollum is a case to consider. A debt settlement company told its clients to stop making payments to their card issuers, sending the money directly to the company, which promised quick and painless debt reduction. Not a penny was sent to the credit card issuers, with the group paying processing and attorneys’ fees only (USA Today).

This is not all. Some counseling services disguise themselves as non-profit entities while they operate as for-profit companies. Claiming to be non-profit, these companies convince clients that it is safe to sign up for their services. They simply prey on consumers’ trust. Some companies also mislead potential clients that there is no fee or a small fee, then asking significant amounts of money. As part of this credit card relief scam, clients send the company a check for $300. They are left with the impression that the money is used to pay their credit card debts. It turns out this is a referral fee, used to find a debt settlement company that will supposedly help them (MSN Consumer Man).

How to avoid credit card relief scams? Do not trust debt termination and debt relief companies that promise to eliminate all of your debts ethically, lawfully, and legally, free-of-charge. There is usually a hefty up-front fee. Some may charge you as much as a couple of thousand dollars to get you started. If the settlement company receives its payment upfront, they do not have an incentive to get the work done. The fees you are charged have to be tied to results.

Then, you may get a document, which states you do not have to pay your debts back in case you are sued. No court looks favorably on this if and when things turn sour. There are other signs to watch for – tell-tale signals that the debt relief company is illegitimate. If they cannot supply a legitimate email, phone number, and physical address, this is a clue you should not deal with them. Even if they provide this information, it pays to check it out.

Beware of debt settlement companies that claim your credit score will not be affected. This is far from true. The settlement procedure can reduce your credit card debt, but your credit score will be damaged.