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What You Need To Know About Debt Relief Firms

Posted in Borrowing Money
February 23rd 2017 by
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Last month, the Consumer Financial Protection Bureau took a handful of firms to court for collecting illegal fees from consumers looking to better manage their debt.

The firms included Howard Law, P.C., the Williamson Law Firm, LLC, and Williamson & Howard, LLP. Attorneys Vincent Howard and Lawrence Williamson ran their debt relief operation alongside Morgan Drexen, Inc.

Unfortunately, many people fall victim to debt relief scams or simply pay for services they don’t really need or benefit from. Here are red flags to look out for:

Upfront Fees

The Telemarketing Sales Rule clearly states that firms cannot charge fees upfront. Only after the debt is settled, reduced, or contract terms met, are they able to assess fees. In the court case referenced above, the firms had a “bankruptcy-related service contract” alongside their debt relief one that asked for upfront fees.

Mention of “Government Money”

There are no government programs that gives money to consumers with overwhelming personal credit card debt. If a firm mentions they’ll be able to get you government money, you should walk away. It’s not true.

Guarantees

Firms can’t guarantee they can make your debt go away. They won’t even know if your creditors will talk to them until they try, and some creditors will refuse to work with certain firms.

Firms also can’t guarantee your unsecured debt will be paid off. And even if they are able to get rid of some of it, you may have to report it as taxable income.

Advise You to Cease Communication with Creditors

Communication is key. Keep in mind that the negotiations the firm is promising to do is something you can try as well. Talk to your creditors and see what they can do before you even contact a debt relief firm.

If you do work with a firm, be wary if they ask you to stop communicating with your creditor. It won’t help anything and leads to the next point.

Promise to Stop Collection Calls

A firm can’t make your creditors or collection companies stop trying to reach you. Many of these firms operate like this: they have you stop making payments, have you make payments to them they put into an escrow account, then try and negotiate with your creditors to accept the amount that’s in the escrow account as a final payment.

During this process, you’ll continue to receive calls, letters and emails asking for payment, and you’ll also accrue late fees that may wipe out any debt reduction.

What You Can Do

Talking to your creditors is always your best bet.

If you need another option, there are non-profit consumer credit counseling services available.

To see information about the court case, click here.


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