What You Should Know About Debt Relief Scams
What You Should Know About Debt Relief Scams Javascript must be enabled to use this site. Please enable Javascript in your browser and try again. × Search search POPULAR SEARCHES SUGGESTED LINKS Join AARP for just $9 per year when you sign up for a 5-year term. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. Leaving AARP.org Website You are now leaving AARP.org and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply. Close
Even with legit companies, debt settlement carries considerable risk. Many firms instruct clients to stop paying their debts, on the premise that this will compel creditors to negotiate a reduction. It might — but creditors are under no obligation to settle rather than, say, sue, and in the meantime you could accrue interest and penalties and damage your credit score. Some firms don’t fully explain the potential consequences, according to the FTC. The commission encourages consumers to carefully weigh a range of options when looking for ways to dig out of debt.
Debt Relief Scams
. . . When debt seems like a hole you’ll never climb out of, a phone call, email, website or ad promising to settle your liabilities for pennies on the dollar can be awfully tempting. But proceed with care: Some debt relief offers are scams that will dig you in even deeper. There are reputable companies and organizations that can help you get out of the red. They can advise you on budgeting and money management, negotiate concessions with creditors or set you up with a plan to put away money each month to pay down your debts, usually over a period of years. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine. Scammers, on the other hand, offer sham “guarantees” to get you out of debt quickly and cleanly — and, crucially, “they ask you to pay them before they do anything for you,” says the Federal Trade Commission (FTC). That’s illegal, and a big red flag that your would-be debt savior isn’t on the up-and-up. (Legitimate debt relief firms do charge for their services but can collect only when they get results.) Some take your money and run; others will string you along, collecting payments and making promises while you fall farther behind on delinquent accounts. The FTC received 20,590 consumer complaints related to credit and debt conseling in 2021, more than in the prior two years combined. Student loan debt, which has ballooned to $1.6 trillion and is a , is an especially ripe market for fraudsters, who collect advance and ongoing fees with bogus promises to enroll customers in government debt-forgiveness programs. Amid the economic anxiety caused by the , consumers have been targeted by offering student loan replayment help and other debt assistance, the Federal Communications Commission reports.Even with legit companies, debt settlement carries considerable risk. Many firms instruct clients to stop paying their debts, on the premise that this will compel creditors to negotiate a reduction. It might — but creditors are under no obligation to settle rather than, say, sue, and in the meantime you could accrue interest and penalties and damage your credit score. Some firms don’t fully explain the potential consequences, according to the FTC. The commission encourages consumers to carefully weigh a range of options when looking for ways to dig out of debt.