Avoiding Debt Settlement Scams
Unfortunately, there are plenty of companies out there that prey on those trying to get their debt under control. In most cases, these companies refer to themselves as debt management organizations. They often promise to act as the go-between with you and your creditors; promising a low monthly payment plan to help you pay off debt.
Though the idea sounds legitimate, what most people don’t know is that these companies tack on serious interest to your payment plan for profit. This can either inflate your monthly payment are extend you payback time considerably. Before committing to an agreement with one of these companies, be sure to seek credit counseling first to learn more about real, legitimate debt consolidation.
How to Determine if a DMP Company is Legitimate
- Ask the representative if their company is an accredited non-profit credit counseling agency. The accreditation will usually be listed with the COA (Council on Accreditation) or the ISO (Organization for Standardization). Also do research on the company to find out if any consumer complaints or lawsuits have been filed against the organization.
- Be sure to ask if counselors are certified for debt management. These certifications should encompass credit counseling, budgeting, and/or credit consumer laws.
- Be prepared to ask representatives what information they will provide you with other than a debt management plan enrollment. For instance, will the agency teach you money management or budgeting skills? And if they do provide education materials, are they free?
- If a DMP or Debt Management Plan is all the company offers, be sure to ask if part of the DMP is reserved for the credit counseling payment. In some cases, these companies will tack on additional fees to your DMP plan without your knowledge.
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