Beware of Debt-Relief Scams

Americans owe $2.5 trillion in consumer debt, according to the Federal Reserve. It’s no wonder there are thousands of debt-relief scams preying on unsuspecting customers.

With today’s downturn in the economy, many people are desperate and vulnerable, and the enticement of the offer to reduce the amounts people owe for a fee is very tempting.

However, authorities warn that many of them are just ripping off customers.

The promise from many debt-relief companies is only an illusion.

Here's the scoop about debt-relief scams according to Clark Howard: “You usually pay an upfront fee to the debt-settlement firm, plus a monthly retainer. Their strategy is to get you to stop paying on your bills and make the credit card companies so desperate that they'll settle with you. The reality, however, is that you just wind up damaging your credit.

It's so easy to want to believe that they have the magic bullet to solve all your problems. But that's simply not the case.”

Larry Burkett, noted financial author, says “debt is not the problem; it is the symptom. I feel debt is the symptom of overspending and undersaving. Our financial coaches will not recommend debt consolidation for a client. Why? Because debt consolidation doesn't work.”

So what do you do? Visit NFCC.org to find a local affiliate of the National Foundation for Credit Counseling. They offer advice about budgeting, which helps about one in three people. In addition to simple budgeting, there are also other techniques they may suggest based on your individual circumstances.

Not all for-profit debt relief businesses are debt-relief scams. “They can be a good option for consumers who have some income and want to avoid bankruptcy,” says John Ansbach of the United States Organization for Bankruptcy Alternatives, a group of 200 debt-settlement companies. “There’s an important role for ethical providers.

3 Steps to Avoid Debt Relief Scams

Learn the difference between debt settlement, debt consolidation, and the other programs. Contact two or three companies and see how their services and fees are different. There are vultures out there, so get as much info as possible before you make any decisions that could hurt you.

Check my Debt Reduction page to learn about various strategies.

2. Do your homework.

Ask lots of questions. Do research on-line or talk to people whose financial opinion you trust. Check out a company’s Better Business Bureau rating. Go to Google.com and type in the name of the company and see what people are saying. (I Google.com a lot!)

Here are some questions you could ask to help you in your research:

• How long have you been in business?

• How does your service work?

• What are the fees?

• What is your BBB rating?

• Are you a member of any professional organizations in the debt industry?

• Can you provide references?

3. Consider doing it yourself.

For many people, it’s a lot easier to get help than doing it yourself. But it isn’t all that hard to create a plan for getting out of debt with all the information available on the Internet. The key is to actually follow it.

Fortunately, I have avoided any debt-relief scams. I use a personal finance software program that literally provides a financial GPS for me to follow. The software calculates the fastest way to zero debt, ALL of my debt. It’s safe and legal, easy to use, and it’s working for me. It is the only debt elimination and wealth accumulation system of its kind.

This debt-relief program has been featured in Broker Banker, True Wealth, Personal Real Estate Magazines, was the Editor's Choice in Mortgage Planner Magazine, and was a recipient of the Ernst and Young Entrepreneur of the Year Award for the Utah Region in 2008. Rest assured, these magazines don't feature any scams.

You really can do this yourself. Contact me to run your own financial analysis. It’s free, and there’s no obligation.

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