How to Distinguish a Good Debt Counseling Agency from a Sham

Debt Counseling

Having a huge amount of debt is like bleeding — you do anything you can to prevent the blood from gushing out, or becoming deeper in debt. When someone is desperate to find a quick solution to financial woes, it is easy to fall into the trap of a debt counseling agency that promises fast and easy repair. This is how some illegitimate debt services companies operate, and you should exercise caution when seeking the services of one.

Initially, fake debt counseling agencies will offer you free services and advertise these solutions as non-profit. They will make it seem that they are accessible any time of the day and act like your friend. They prey on those who are overwhelmed with a huge amount of debt and those who, in their vulnerability, will take whatever way out they can. The options these fake debt counseling agencies provide will sound too good to be true (and they probably are). They will offer to repair your credit rating, even if that is not something within their capacity. Of course, these signs may seem obvious, but often, because of clever advertising and charismatic counselors, debt counseling agencies get away with them. Here are ways to distinguish a good debt counseling agency from a sham:

  1. A good debt relief services group will not pose as a non-profit; they will let you know right away that there will be charges associated with their services. If the debt counseling agency is truly non-profit, they should be a member of the American Fair Credit Council.
  1. If the debt relief services company is legitimate, it will not ask you for an upfront service or set-up fee. A sham will ask you to pay before availing of their services, and force you to do so after communicating your intent to use their products.
  1. A good debt counseling agency would have accreditation and testimonials. Often, if the agency were a sham, a customer would have already written a complaint against it. See if the company has responded or kept silent.
  1. A debt counseling agency is required to educate their clients regarding their options and how to get out of debt. Make sure the agency provides financial education and is not just out for a quick buck.
  1. You will know a debt counseling agency is a sham if they sell you a new credit identity. Chances are, this is a stolen Social Security Number, and you should report any agency that offers it. The illegitimate company will encourage you to lie by saying you should get an Employee Identification Number even if you don’t have a business. This is illegal and you could be prosecuted because of this.
  1. A good debt counseling agency will propose a legitimate debt management plan that is suitable to your financial situation and legal. If the company promotes the following, then you should be suspicious:
  • You are advised not to contact the creditor directly.
  • You are advised to dispute information on banking statements that reflect the debt.
  • You are not informed of your legal rights as a consumer, also known as “Consumer Credit File Rights Under State and Federal Law.”
  • The agency does not provide you with a written contract for the services you agreed upon.

Often, it is your instinct and common sense that will inform you whether or not a debt counseling agency is a sham. Don’t opt for the quick solution or the one that gives you the most savings. When it sounds too good to be true, it usually has a catch or something in the fine print you might have missed. Also, if the agency promises to improve your credit score, be skeptical.

The best way to get a good debt relief services company is to do your research and ask questions before agreeing to any contract. Check if the company is registered. Inquire about all charges to avoid hidden fees and penalties. Look at the nature of the business–is the agency truly non-profit or commission-based? You can also ask your friends and co-workers for referrals. Whatever route you decide to take, it helps to sleep on it first, and be educated with the pros and cons of each company.

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