The Basics of Debt Management Scams
Debt management scams often prey on people who are in financial distress and struggling to make ends meet. The scammers promise to help consolidate your debt or negotiate lower payments, but instead end up stealing your money. They may even guarantee that they can get your debt reduced or eliminated. The scammers will typically ask for an upfront fee before they do anything to help you. These scams can be difficult to spot, as the scammers are often very convincing. They may even use scare tactics, such as telling you that your debt will be sold to a collection agency if you don’t act now.
Common Tactics Used by Debt Management Scammers
There are several common tactics that debt collection scammers use to trick people into giving them money or personal information, such as:
- Promising to lower your monthly payments or interest rates for an upfront fee.
- Claiming they can get you out of debt in a short period of time.
- Making false promises about their results.
- Using high-pressure sales tactics.
- Claiming to be affiliated with a government agency or program.
Common Types of Debt Management Scams
While there are many legitimate debt management programs out there that can help you get your finances back on track, there are also a number of scams that you should be aware of.
- Debt Settlement Promise Scam: These companies will contact you claiming that they can negotiate a lower payoff amount with your creditors on your behalf for a fee. They may even tell you that they can get your interest rates reduced or waived entirely. In reality, these companies have no more power to negotiate with your creditors than you do.
- Debt Consolidation Loan Scam: These companies will claim to be able to get you a lower interest rate by consolidating all of your debts into one monthly payment. They may even say that they can get you a lower monthly payment by consolidating your debts with a government program. In reality, these consolidation loans typically come with higher interest rates than the individual debts you are consolidating, and you will still be responsible for repaying the full amount of the loan plus any fees the company charges.
- Advance Fee Scam: These companies will often charge you extremely high interest rates or upfront fees for their services. Many times these rates are simply a way for the company to make money off of you without actually helping you to pay off your debts.