Debt Settlement Company Scams

How to Avoid Being Scammed By a Debt Settlement Company

It’s a sad fact.

When you’re having debt problems, not everyone who claims to want to help is genuine.

Many organizations are simply out to make a fast buck from your misfortune.

Every year, we help thousands of Canadian debtors who report past experiences ranging from unprofessional to misleading to downright fraudulent.

It’s extremely important to make sure any assistance you enlist is reputable and proven.

In this article, we’re going to alert you to some of the more common debt settlement company scams.

Be realistic – and be dubious about debt settlement company claims

Good debt settlement practice is about transforming your situation once it’s gotten unmanageable.

The process is about putting you back in control so you can find some breathing space and begin to tackle your debt.

Addressing debt in a sustainable, responsible way is also about counselling – and learning skills that will prevent your problems from reoccurring.

Helping your situation isn’t about making wild promises designed to entice you into paying extortionate fees.

While you may be able to negotiate a reasonable settlement with a creditor, you’ll rarely be able to make your debt disappear.

It’s essential you’re realistic about getting your debts back under control.

Part of that means being wise to the scams, and able to identify what sounds too good to be true – because, if it seems so, it invariably is.

Let’s look at some of the claims that should get your alarm bells ringing.

Bogus Claim Number One – We’ll stop the creditors contacting you

In reality, your creditors are permitted to chase up their debts.

There isn’t a method – short of bankruptcy or a consumer proposal – that is going to stop them from doing so because that’s how they make their money.

Companies that claim to be able to stop creditors making contact with you are making promises they very likely can’t keep – or at least in many cases, have zero intention of ever trying to honour.

The truth of the matter is that this is just another area where debt collection companies make wild claims – and then get you to do the work.

There really isn’t much they can do to help that you can’t do yourself – for free.

When your repayments have gotten out of hand, good communication with creditors is essential, and it might make your situation more manageable.

You can write to them and ask them to stop calling – to put all correspondence in writing.

Your primary aim, however, should be to work something out that both parties can deal with – before the creditor decides their only option is to take you to court.

Your creditors know that debt settlement companies are in it purely for the money.

If many of the debt settlement company claims were valid, it would put credit providers out of business for good.

While you can stay in contact with creditors and stop collection calls yourself, credit providers prefer to deal with reputable professionals, such as non-profit organizations.

Bogus Claim Number Two – We operate legally in Canada

This is where the snake-oil truly gets the full sell.

To begin with, many profit-making debt settlement companies that operate in Canada are based in the US.

They don’t actually hold a license to work in Canada. So, how do they look to get around that?

Well, in the absence of an appropriate permit, American debt settlement companies don’t ever put their hands on your money.

That’s to say they’ll make you do some of the work again, and transfer any settled sums directly to your creditor.

The only time these for-profit companies touch your hard-earned money is when they collect their considerable fees.

Bogus Claim Number Three – We’re government approved

Claims of government approval are always a huge warning sign.

Whenever you see a for-profit debt collection company that claims to have any form of government or official endorsement, you know it’s misleading you at best, openly lying to you at worst.

The fact is, the government doesn’t award any form of approval to profit-making debt settlement companies.

There’s no vehicle for such an endorsement, and it certainly never happens.

The laughable thing about such claims is that they’re an attempt to twist the fact that debt settlement companies in Canada are regulated – and turn that into some sort of promotional tool.

More often than not, non-Canadian debt settlement companies are actively flaunting those very regulations anyway.

Debt settlement companies are regulated so that consumers like you are protected.

Just because a company doesn’t break those rules, it doesn’t make them “government approved.”

Any time you hear this particular claim, you can cross the company concerned off your calling list.

What You Can do to Avoid Debt Settlement Company Scams

Always read the small print. When you’re considering enlisting the help of a debt settlement company, look at their terms and conditions.

Twenty minutes spent reading now might save you several wasted months – and thousands of wasted dollars.

Does the company take fees up front?

If it does, avoid it altogether.

Does it provide any guarantee of service or results to justify its charges?

If it doesn’t, then ask yourself why not.

Check if the company is licensed in Canada.

It’s well worth contacting your local consumer protection office to see if the company you’re considering is licensed to provide services in your province.

A quick check now will maybe save you a lot of stress later down the line.

Google is your friend.

Debt settlement companies are no different from businesses providing any other service.

In this day and age, it’s simple to investigate the reputation of any entity.

Internet searches reveal much about reputations.

You can bet that if there’s been a problem, somebody somewhere will have left a review.

If the company you’re looking at has ever been sued, you’ll likely find online records and reports about that too.

If you can’t find much information about a company via Google, walk away.

No news is usually good news, but many disreputable debt settlement companies change their trading name frequently.