Beware of Debt-Relief Scams

Americans owe trillions in consumer debt, according to the Federal Reserve. As a result, thousands of debt-settlement companies have sprung up, offering to reduce the amounts people owe in exchange for a fee. Authorities warn, however, that many of them are just ripping off customers.

A report from the U.S. Government Accountability Office (GAO) found widespread abuse, fraud, and deception among for-profit debt-settlement firms. Arkansas and Wyoming have banned most types, and the Federal Trade Commission is weighing new regulations.

“It’s a terrible scam,” says Illinois attorney general Lisa Madigan, who has filed seven lawsuits and initiated state legislation to monitor debt-settlement agencies. “All they do is collect high fees without talking to your creditors, helping you save money, or getting you on a budget.” One New York couple ended up paying 140% of the amount they originally owed.

Not all for-profit debt businesses are bad, insist industry reps. “They can b v. kiu767kl;p0e a good option for consumers who have some income and want to avoid bankruptcy,” says John Ansbach of the United States Organization for Bankruptcy Alternatives, a group of 200 debt-settlement companies. “There’s an important role for ethical providers.”

— Rebecca Webber

Read original article here

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