Beware of Debt Relief Scams
Anyone who has experienced debt knows how stressed out and desperate it can make you feel. It seems impossible to pay off debts while more bills are constantly coming in, and a person can easily become desperate enough to seek relief from other sources. When someone is in this position, it is easy for scammers to take advantage of them by offering hope with no actual solutions, resulting in even more problems.
There are many companies out there that scam struggling families out of what little money they have left, but the government is working on rooting them out. Recently, the Federal Trade Commission went after a debt relief operation called DebtPro 123, and its effort ended in a settlement of $7.9 million.
How the Scam Worked
The foundation of any debt relief scam is making false promises to desperate people. According to the FTC, DebtPro 123 told its clients that its “debt resolution program would completely resolve consumers’ credit card and other unsecured debts (including department store accounts, personal loans, medical bills, student loans, and accounts with collection agencies.” They claimed that they reduce their clients’ debts by 70-80%, including fees, and they ensured that their clients would “become debt-free quickly and comfortably”.
Any company that advertises a “quick” and “comfortable” plan for debt relief is dishonest. Paying down your debts will be a long and painful process, even with good organization and outside help.
Promises vs. Reality
DebtPro 123, along with other convincing scams, use professional-sounding words and methods to entice potential customers into their trap. DebtPro 123 claimed to have a “debt calculator” that backed up their claims. The company also had a two-step program for debt relief. The first step was the client investing in a “Creditor Fund/Settlement Account” to be used for negotiations with creditors. The second step was for the client to wait while DebtPro 123 worked on getting their debt terms changed.
While the client awaited financial relief, DebtPro 123 urged that they stop paying their bills and stop communicating with all creditors. Since nothing was actually being done, this resulted in the piling up of bills, interest, late fees, and other penalties. The company claimed that they would remove negative information from the clients’ credit files. This was an empty claim, since most negative credit information will remain on reports for seven years no matter what.
DebtPro 123 also assured its clients that they had a skilled legal team backing up their claims. They told clients that, “the attorneys will communicate directly with your creditors and debt collectors via the mail and telephone. They will audit your bills and the collection methods being used by the creditors to determine if your consumer rights have been violated.” Shockingly, when the FTC investigated DebtPro 123, they found that there was “no legal department, ‘legal in-house counsels’ or any attorneys on staff.”
What Actually Happened to the Clients
The people unfortunate enough to trust DebtPro 123 ended up in a much worse situation than before. Money that should have gone towards paying off debts instead went into DebtPro 123 fees. Creditors who were not receiving payments filed lawsuits against the debtors. The clients ended up more in debt, causing some to lose their homes, have their wages garnished, or file for bankruptcy.
Debt Negotiation vs. Bankruptcy
If you are struggling with debt and considering debt relief options, this article may have filled you with even more anxiety, but it’s important to seriously look into any company that claims that it can provide aid before giving them money.
You may also want to consider bankruptcy as an option, depending on your circumstances. There are differences between how the saved money is handled in debt negotiation verses bankruptcy. In debt negotiation, all of the money that is saved is taxed, so you still end up having to pay off some of the debt. With bankruptcy, there is no charge for discharged debts.
If you are in serious need for either debt negotiations or bankruptcy, you should first consult an attorney to make sure your money goes to the right place. Dan Higson is experienced in all aspects of California debt laws. Call today if you have any questions about your situation.