According to Business Insider the American people have a lot of debt!
Here is just a snap shot of the debt Americans owe as of Q2 of 2017.
- Student Loan Debt $1.34 Trillion
- Auto Loan Debt $1.19 Trillion
- Mortgage Debt $9.14 Trillion
- Credit Card Debt $784 Billion
Debt Relief Scammers Have A Lot Of Opportunities
With numbers that high a lot of people are being smothered by the never ending mountain of debt that comes in month bills, late-bills, notices, etc.
Being in debt causes a lot of problems for a lot of people except the scammers! Some people in debt turn to ‘debt relief’ as a ‘miracle’ way to get of debt fast, with a lot being scammed.
No Signs Of Stopping
Just recently the FTC and the Attorney General in Florida put a stop to a ‘massive debt relief scam‘. This particular scam was shut down in May of 2017, but many still continue to operate with no signs of stopping.
Education Is Key
Since so many ‘debt settlement/relief scams’ operate daily in the U.S.
It is important that people be educated on Debt Relief Scams and that is the purpose of this article.
This article will help educate you on the most common variations of this scam, how this scam works, the signs of a debt relief scam and more.
Most Common Scam Variations
This type of scam has a lot of variations, so only the most common versions will be talked about in this article.
Most Common Version
The most common version of this scam is in the form a Debt Relief Letter that comes in through the mail.
Before I continue on I must state that legit and scam companies both send these ‘letters’ through the mail.
However the structure of letters are totally different.
2nd Most Common Version
The second most common version involves getting a phone call from a debt relief scammer telling you that they can ‘cut your debt in half’ or ‘protect you from lawsuits’ or my favorite ‘be debt free in 12-36 months’.
No legit debt relief company can promise any of those things, it is illegal under Federal & State statute, but most people do not know that and fall right into their trap.
There Are Other Versions
Now there are other versions of this scam, with a new hybrid involving emails and text messages, but if you know of any other common variations please post them in the comments down below.
How A Debt Settlement Scam Works
Since typical debt settlement scams begin either over the phone or through the mail that is how this example will be written. If you know of other ways debt relief scammers target you please post those in the comments as well.
It is important that all the aspects of this scam be exposed, so post a comment if you know another way this type of scam works.
(1) You Receive A Letter/Phone Call
In this first stage you either receive a letter from the ‘debt settlement agency’ or a phone call. Either way the story will end up the same, so let’s look at each of this shall we.
Most of these ‘letters’ will feature a very brief description of either a ‘new law’ or ‘government program’ that qualifies you (the reader) to have your debt settled, reduced or be completely ‘debt free’.
These letters will also feature words or phrases that suggest that the Debt company can ‘reduce your debt’ by a ‘certain’ percentage or number.
They will also commonly feature ‘official’ seals or agency logos/numbers to help sell the scam. They always have a ‘limited time Offer’ statement within the letter as well.
People fall for this scam in letter form because to some people it is a ‘answer’ to a prayer or even a ‘miracle’.
Most phone calls begin with the person giving their fake name along with the fake name of the fake company.
The person is usually very nice and will offer you promises similar to the letter in many respects such as:
- ‘We can protect you from lawsuits.’
- ‘We work closely with financial institutions.’
- ‘You can be debt-free in less then 2 years.’
- The up-front fee is a one time thing.’
Generally people will fall for this scam more easily over the phone because of the trusting nature of a phone call. It is a person who is offering you a solution to your problems, but don’t fall for it.
A legit company can’t do things that a scam company can do such as the fact that Legit Debt Settlement Companies can not call you after 9 pm.
(2) Personal Information Given
Once they peak your interest in either the letter or the phone call the next step is a follow up where you give over your personal information to them.
It is important that before you do this that you research what information legit companies can have & not have. However most people do not do this and end up giving up information that does more harm then good.
The scammers use this information to begin finding out exactly how much money and time they can take from you in exchange for the promise of ‘debt reduction’.
Once they have taken your personal information they then ask for upfront payment.
(3) Ask For Upfront Payment
After they have taken your personal information they will naturally ask for their ‘up front payment’ and this is where you have to know the statutes.
If is illegal to ask for any ‘upfront payments’ in the U.S unless certain practices are followed, which I will get into later on.
Most People Pay Anyway
Most people decide to pay the company anyway as they see it as the only way to get out of debt, but that is not true. There are many ways to deal with your debt, but most people do not research ways to deal with debt and that is what the scammers count on.
(4) Start Giving Bogus Advice
Once they have your personal information, and your up-front payment they will then begin to give you advice that any rookie lawyer would never give.
Some Of The ‘Advice’
Here is an example of some of the ‘advice’ these scammers give people and a lot of them follow it to a ‘t’.
- Stop communicating with your creditors. (BAD IDEA!)
- Stop paying your creditors. (BAD IDEA!)
- Close accounts linked to your creditors.
- Open up new lines of credit.
- Take out loans to pay down debt. (STUPID)
It is important to realize that doing any of the above will not help you get out of debt faster it will help you get into debt quicker!
Real legit debt settlement companies will only offer real legal advice to prevent possible lawsuits associated with bogus legal advise.
(5) ‘I’ve Been Scammed’ Moment Happens
The scammer and the scam company will lead the person along as their debt climbs and the ‘payment’ amounts increase. This will increase until the person has the ‘I’ve been scammed’ moment and starts asking questions that the scammer can’t answer.
Once that happens the scammer and company move on to another victim. This continues until the scam gets reported to the proper authorities, which I will discuss coming up.
Signs Of A Debt Relief Scam
The following are sure signs of a debt relief scam. If a debt settlement company follows any of these signs the best thing to do is to report them to the proper authorities.
Sign 1: Tells You ‘They Can Stop All Debt Collection Calls & Lawsuits’.
If you are being contacted or even harassed by debt collectors it is important that you know your rights.
Certain behaviors are prohibited under the Fair Debt Collections Practices Act (FDCPA) and certain rights are granted to you.
Debt Resettlement Companies can not legally stop any debt collection calls or lawsuits.
Sign 2: Charges ‘Upfront Fees’ Before The Debts Are Settled.
That is illegal under FTC 2010 Rules unless one or more of the following conditions have been met:
- The debt relief service successfully negotiates, settles, reduces or changes the terms of at least 1 of the person’s outstanding debts.
- There is a written settlement agreement, debt management plan, or other agreement between the consumer, the Creditor and the customer has agreed to it.
- The consumer has made at least 1 payment to the creditor as a result of an agreement negotiated by the debt relief company.
Sign 3: Claims The Process Is ‘Fast, Easy & Painless’
The claims had better include mandated upfront disclosures such as:
- Proposed Fee & Refund Policy
- Debt Relief Company Program’s Length Of Time
- Accurate Saving Estimates From Using Program
- Disclosure Of Negative Credit Effects
The above 4 things are mandated to be disclosed to anyone going through debt resettlement with a ‘for-profit’ debt resettlement company.
Sign 4: Advertises A ‘Government Program’ That Reduces Debt
This is the ‘classic sign’ of this scam. Any letter, phone call, email, or ad that talks about a ‘government program’ that helps you reduce debt is a scam.
If it was a real ‘government program’ they would have to provide links to the site, the act and not to mention that the media would be all over the ‘latest debt reduction program’.
Sign 5: Promises To ‘Settle’ You Debt For ‘Pennies On The Dollar’
That is illegal as it is considered to be ‘false advertising’.
No legit company can promise you anything more then a ‘free consultation’ if they even offer one.
It is illegal to make these types of promises upfront without any knowledge of the debt, the creditor(s) or the terms of said debt.
Sign 6: Tells You To Stop Communication With Creditors
This is also a ‘classic’ sign of this scam. Legit debt resettlement companies would never advise you to do that because that could lead to very negative consequences. Any person advising that is not a person you want handling your debts.
Rules Of Debt Collection
When it comes to debt collection there are RULES that must be followed in the U.S., the author recommends researching the following and or consulting an attorney on the rules of debt collection.
FDCPA stands for The Fair Debt Collection Practices Act and it protects consumers by prohibiting certain behaviors and providing legal disclosure on several matters.
The FDCPA mandates the following:
- Debt collectors identify themselves in every communication.
- Disclose that the communication is from a debt collector and that information given will be used in efforts to collect such debt.
- Give the name & address of the ‘original creditor’.
- Disclose the customer’s Right To Dispute the debt.
- Provide verification of the debt.
- File a lawsuit in the proper venue.
The FDCPA prohibits the following:
- Calling at unreasonable hours (between 9 pm and 6 am).
- Failing to cease communication upon request.
- Repeated or non-stop phone calls.
- Communicated with customers after bankruptcy.
- Communicating with consumers at place of employment.
- Communicating with consumer with legal representation.
- Communication with consumer after request of debt validation.
- Misrepresentation or deceit to collect debt.
- Publishing consumer’s name/address on ‘bad debt’ list.
- Seeking amounts outside of original stated terms.
Research The FDCPA
The FDCPA prohibits more activities and it is important that you research and find out what those are to protect yourself.IF you are unable to research please consult a lawyer who can help you.
Report A Debt Relief Scam
If you are in debt and you suspect that you might be getting scammed, or if your debt collector is not obeying the law you need to report it to the proper authorities.
To begin the process of reporting a scam please click ‘Report A Scam‘.
Leave A Comment Below
If you have any questions about debt relief scams or debt relief in general please leave them in the comments below.
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