Consumers overwhelmed by credit card debt naturally seek for help, but don’t be taken in by false promises.
According to the Federal Trade Commission, anyone can face a financial crisis due to illness, unemployment, or overspending. Although mounting bills and shrinking income is extremely stressful, consumers should be wary of phony promises of quick and easy solutions to credit card debt.
Warning
The Federal Trade Commission warns stressed-out consumers to be wary of companies that promise you that you can pay off your debts for “for pennies on the dollar,” that require you to pay them a monthly service fee, or that tells you to stop communicating with your creditors. The FTC further warns against companies that promise to remove negative information from your credit report. According to Sandra Block writing in USA Today, red flags for credit counseling organizations include a large upfront fee, a claim that debt settlement won’t affect your credit report, and a claim that the company can protect you from lawsuits.
FTC Prosecutions
The FTC has prosecuted more than a dozen companies for deceptive consumer debt relief scams. For example, one of the biggest cases was against AmeriDebt, Inc., which was ultimately settled for $35 million. AmeriDebt claimed to be a non-profit credit counseling service which kept some of the money consumers sent to reduce their debt and sent the rest to their affiliates.
Misconceptions
Some consumers seem to think that the Credit Card Act of 2009 was passed to help citizens pay off credit card debts, but this is not the case. According to the Federal Reserve, the Credit Card Act applies to credit card companies and restricts their ability to change your interest rate, to charge you certain fees, or to change the terms of your credit card.
Solutions
According to Christine Dugas, writing for USA Today, bankruptcy filings could approach 2 million in 2010 and a growing number of Americans who need the protection of bankruptcy cannot afford to file, since both attorney fees and filing fees have increased. Bankruptcy is usually considered a last resort, since the information remains on your credit report for ten years. Still, this is a legal option that allows people to start over. Consolidating debts by borrowing on the equity in your home is a possibility, but if you cannot pay the mortgage, you will be in danger of losing your home. Reliable credit counselors in your area can be found on the National Foundation for Credit Counseling and the Association of Independent Credit Counseling Agencies we sites.
Although there are no quick and easy solutions to overwhelming debt, there is hope. Counseling, consolidation, and bankruptcy are viable options.
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