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How Not to Spell Relief: Debt Relief Scams

Four years removed from one of the greatest economic crises in history, consumers are still reeling from the aftereffects.  So, many consumers, feeling the crunch of growing credit card debt, are seeking help from companies holding themselves out as debt relief providers.  And getting nothing in return.

These companies generally offer to settle a consumer’s debt with creditors for substantially less than the debt’s principal through monthly payments that the company holds in escrow.  Unfortunately, many of these companies not only fail to fulfill their promises to consumers, but fail to offer any services at all. Companies charge large upfront fees, or multiple hidden fees.  Often, a substantial portion of a consumer’s monthly payment goes to the company’s fees, with little to nothing offered toward reducing the debt’s principal.  The Department of Justice Consumer Protection Branch, in collaboration with its investigative partners, is working to prosecute such companies.  But we need your help.  So, if you are contemplating debt relief services, the following tips may help you avoid scams:
  • Fraudulent debt relief companies will often make claims of being able to negotiate a one-time settlement with creditors that will reduce a consumer’s principal by fifty percent or more.  The Consumer Federation of America, an association of non-profit consumer organizations, warns that such a promise is a virtual impossibility.
  • If you have trouble making credit card payments, immediately call the creditor to work out a payment plan.  If that is unsuccessful, a non-profit credit counseling service may be able to help you.  These services may charge a small fee, but the cost will be substantially less than using a debt relief company.  An excellent resource for locating a local credit counseling service is the National Foundation for Credit Counseling, at
  • If a company offers a “one size fits all” solution, what they are really offering is a “no size fits anyone” problem.  Legitimate credit counseling services tailor a consolidation plan to each consumer’s individual needs.
  • Do not be afraid to ask questions.  Demand that the company disclose set-up and maintenance fees, and that these fees be set in writing.  According to the Consumer Federation of America, consumers should not pay more than $50 for the set-up fee and $25 for monthly maintenance of the account.
  • Do not rely on the company’s website.  Conduct your own searches of the company – the Better Business Bureau and state consumer protection agencies are excellent resources.
For more information on debt relief scams, see the Federal Trade Commission’s website.  Additional information on legitimate debt relief services can be found on the Consumer Federation of America’s website (PDF).
Updated April 7, 2017