Guest Editorial: Beware of 'get out of debt' scams
Kicking someone when they're down is always a low blow. Here's something just as bad: Scamming someone struggling debt who is trying to get their finances back on track.
Unfortunately, it's a common practice. Earlier this month, the Minnesota Commerce Department emailed warnings about debt settlement scammers who will take your money but never deliver on their promises of quick debt relief.
The commerce department noted that many reputable businesses and organizations help people get out and stay out of debt. But it warned that some companies target debt-burdened consumers with deceptive or false claims, illegal fees and bad advice that can push them even deeper into debt or legal trouble with creditors.
In Minnesota, anyone who offers to renegotiate or reduce your debt with creditors for a fee must be registered with the Commerce Department as a debt settlement provider. The department also licenses credit service organizations, which help consumers improve their credit, and debt management providers, which help consumers develop a budget plan to repay creditors.
It's important for consumers to understand the differences among them because each offers different services and results.
The commerce department offers these tips to avoid falling victim to a debt relief scam:
• Check the license. Make sure the company is registered in Minnesota by using the License Lookup tool on the commerce department website. If it is not licensed, contact the commerce department at email@example.com or at 651-539-1600.
• Never make upfront payments. Advance fees for debt settlement services are banned under both federal and state law. Minnesota law states that a debt settlement provider may not charge or collect any money until it has performed the services in the contract.
• Read the fine print before you sign. Carefully review the written contract so you understand all fees and services. Make sure what you get in writing is the same as what you were told over the phone.
• Know your rights. The contract must include a notice of your right to cancel it at any time with 10 days written notice. After cancellation, the debt settlement provider must stop collecting monthly fees and may also be required to immediately refund some fees.
• Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short time. Debt relief is an intensive process that requires a detailed analysis of an individual's financial situation. If an offer sounds too good to be true, it probably is.
• Beware of advice to stop paying your creditors. A debt settlement or debt management company cannot tell a consumer to stop paying their creditors. If they do, it is a red flag the company may not be trustworthy.
• Consider other options. Nonprofit agencies with certified financial counselors can help consumers develop an action plan to improve their finances. Check with the National Foundation for Credit Counseling (nfcc.org) or the Financial Counseling Association of America (fcca.org) to find local assistance.
Those with questions about a debt relief offer or a possible scam may contact the commerce department's Consumer Services Center by email at firstname.lastname@example.org or by phone at 1-800-657-3602.