Avoiding Debt Consultant Scams
Financial scams are unfortunately all too common in today’s world, and one of the more insidious ones involves so-called “debt consultants”. These individuals or companies promise to help you reduce your debts significantly, often without the need for bankruptcy. However, the reality is often far different. In this article, we’ll explore five ways to identify whether you’re being scammed by a debt consultant.
The Promise of Debt Reduction
Debt consultants often advertise the possibility of reducing your debts by up to 70% without having to declare bankruptcy. But is this really possible? The simple answer is yes, but it’s not as straightforward as they make it sound.
There are indeed legitimate ways to reduce your debts, such as through a consumer proposal, which involves a government-licensed administrator helping you propose a legally binding settlement to your creditors.
However, some debt consultants lure you in with the promise of this option, while actually leading you down a far riskier path that involves simply stopping payments to your creditors and hoping they eventually agree to settle for less.
High Upfront Fees
One of the surest signs that you’re dealing with a scammer is if they demand large upfront fees. When you file a consumer proposal or bankruptcy, you don’t make any payments until your paperwork is filed with the government.
In contrast, scammers will often charge you significant amounts before they’ve done anything at all. If a debt consultant is pushing you to pay large fees upfront, it’s time to start asking questions.
Lack of Communication with Creditors
Another red flag is if the debt consultant doesn’t actually contact your creditors. Legitimate debt advisors are required by law to notify all known creditors within five days of filing any paperwork.
On the other hand, scammers will often wait until you’ve saved up a full settlement amount (which can take years) before they make any attempt to contact your creditors. By this time, you may have already been sued or had your wages garnished.
No Real People
If you can’t find any information about the people behind the company, that’s another warning sign. Reputable firms will have staff profiles available on their website, often including photos and bios.
Scammers, on the other hand, often don’t have a website at all, or if they do, it won’t have any real people’s names on it. If you can’t find any evidence of real people behind the company, be wary.
No In-Person Meetings
A lack of in-person meetings is another worrying sign. Reputable firms will usually offer to meet with you in person to discuss your options. Scammers, however, often operate over the phone or via email and may not even be based in your country.
Never agree to pay for financial services without meeting with someone in person. You need to be able to trust the person you’re dealing with, and that’s hard to do if you can’t even meet them face-to-face.
Not Explaining All Your Options
Finally, if the debt consultant isn’t explaining all your options to you, that’s a strong indication they’re just trying to sell you their service. A reputable advisor will tell you about all the potential ways you can deal with your debt, including budgeting, debt consolidation, credit counselling, consumer proposals, and bankruptcy.
If the debt consultant is only pushing one option (usually the one that involves you paying them large amounts of money), then it’s likely you’re being scammed.
Conclusion
Unfortunately, there are unscrupulous people out there who are willing to take advantage of those in financial difficulty. However, by knowing what to look for, you can protect yourself from falling victim to these scams.
Always do your research, ask plenty of questions, and never agree to pay for anything until you’re sure you’re dealing with a reputable company. And remember, if something sounds too good to be true, it probably is.