Looking For Debt Assistance?

Don't Get Scammed And End Up Further In Debt

Fact: If you are looking for debt assistance, unfortunately you are a target.

You are a target for any number of unscrupulous companies and individuals looking to prey upon your financial misfortune. These "sharks", if you will, have people like you squarely in their sights as potential victims of their numerous loan and debt scams.

Why?

Because many people who are facing debt problems are in a vulnerable state and perhaps even feeling desperate for some kind of debt assistance that will make their money problems disappear... today! And unfortunately, this "state of vulnerability" and "sense of desperation" can often lead people like you and I to believe things we that we shouldn't, and to ultimately make poor decisions.

The result?

We get scammed. We lose money. We end up further in debt. And more desperate than before.

2 Keys To Avoiding Debt Assistance Scams

There are two main keys to avoiding a debt assistance scam.

  1. The most important one is, use your common sense. If something sounds too good to be true, it is. Crooks, cheats and scammers will tell you and I whatever we want to hear in order to get our money. Want to "get rich quick", "lose 30 lbs. in a week" or "double your money on an investment in 6 months"? They'll tell you it can be done. Do you want to be out of debt instantly? They'll tell you that can be done too.
  2. The second key is learning what type of loan and debt scams are out there right now so that you can spot one (and steer clear) when you come across it.

Don't think you are the type of person who can fall for a debt assistance scam? Don't be so sure. The people and companies that offer these scams are very, very convincing. And when you come across an opportunity that promises to "make your debt problems go away", you want to believe so badly that it will work that all logic goes out the window. Your emotions take over your brain and better judgment, and you end up falling for the debt scam. It happens all the time.

So keep your head about you, learn about the debt consolidation loan scams and debt elimination scams that exist and most importantly, remember that there is no magic bullet that will get you out of debt. It takes planning and hard work on your part.

Sidebar: Just to be clear, I am not for a moment suggesting that there are not many excellent and reputable debt assistance companies that exist and who can help you tremendously in your debt freedom journey. There are. But even these reputable debt help companies can only do so much for you. The responsibility to "get you out of debt" still lies with you even if you seek debt assistance.

Need help finding the best debt reduction service for you? Click here.

Learn To Spot A Loan Or Debt Scam Before You Fall For It

Below you will find a fairly comprehensive list of the loan and debt scams that exist out there today. Some are downright illegal, while others that I have listed are unethical, use bait and switch techniques, or at the very least, use misleading advertising. Nonetheless, it will stand you in good stead to know this list of scams and half-truths so that you can prepare yourself if you come across one in your search for debt assistance.

Debt Elimination Scams

Probably the most notorious debt scams out there today are the debt elimination scams that have spread like wild fire over the internet. I have purposefully put these scams at the top of the list for two reasons. First, people who fall for these scams often end up losing $3,000 to $5,000. But perhaps even worse, they could end up in federal prison. Talk about adding insult to injury!

Here are the three basic takes on this debt scam.

No Money Lent Argument

The no money lent argument is based upon the premise that your credit card company never lent you any money in the first place (they lent you credit), and therefore you don't owe them the money back. In fact some of the scam artists who "sell" this idea take the argument a step further, saying that not only do you not owe the money, the credit card companies owe you the entire amount of credit that they extended you in the first place. I know it sounds complicated, but that is part of the "pitch". The more complicated and "legal" it sounds, the more people fall for it. Read more on this debt assistance fraud here...

Truth In Lending Argument

Another variation of this scam is based on the premise that the banks and credit card companies are violating the truth in lending act and/or other consumer protection laws. The argument goes that the credit card companies withheld the fact that they risked none of their own assets when they extended credit to the borrower. In other words, if the "no money lent" argument is the "truth", then by withholding this "truth" from the borrower, the credit card company has violated the Truth In Lending Act.

What garbage.

The Code Of Federal Regulations clearly states that the use of credit does form a binding contract. You accept the terms of your credit card statement when you use the credit.

Debt Arbitration Scam

Another extension of the "no money lent" argument is the credit card debt arbitration scam. The premise is to force the creditor into binding arbitration to try and seek a "reward" equal to the outstanding debt, or at least delay the collection of the debt.

How do you get scammed? Well, the debt arbitration services promoting the "no money lent argument", "Truth in Lending Act Violation" and "credit card debt arbitration" scams "generously" offer to sell you all the documentation you need to "legally" eliminate your debts. The cost is usually in the $3,000 to $5,000 range (but can be much more). Once you have the paperwork, you fill it out, and take it to your bank. Voilà, you are out of debt... NOT!

This debt assistance scam has become so prolific that the FBI has stepped in and is looking to charge people (not the scammers but the victims who fall for the scam) who try and get away with this "crime". Yes, the FBI considers it a crime.

From the FBI 2003...

Beware of scams like these --

Debt or mortgage elimination offers. The perpetrators of these schemes offer to take advantage of 'loopholes in the system' that will eliminate your entire mortgage for an up-front fee. Don't believe it. There are no "loopholes."

Federal Bureau of Investigation: Fraud Alert

Avoiding Debt Consolidation Scams

Although many good, reliable debt consolidation companies exist that can and do help many people get out of debt successfully, there are also many companies that are out to take your money and nothing else. Here's a list of 7 questions and 3 things you can do to avoid being caught in a debt consolidation scam and ensure that you end up with the best debt consolidation company to meet your needs.

6 Debt Settlement Scams And 2 Ways To Avoid Them

The debt settlement industry itself is a fairly new phenomenon, arising and growing in conjunction with the increase in consumer debt and the public's inability to pay it back. And as consumer debt has grown in the last 10 years we have also seen the proliferation of new companies entering the debt assisatance and negotiation sector.

Debt settlement can be a lucrative business. And as such, it has attracted many less than "above-board" companies and individuals looking to make big money preying on people's misfortune. One of the most widespread "scams" when it comes to debt settlement agencies is simply convincing people to sign up for their debt assistance programs when clearly their debt and credit situations are not suitable for this type of debt relief. At the very least, these people end up with extremely damaged credit, increased debt, and a loss of the fees paid up front to the settlement company. (Update: As of October 2010, the ability of many of these companies to collect fees upfront has been eliminated by the FTC.)

Learn more about 6 of the most common debt settlement scams out their today and 2 thing you can do to avoid them.

Novation - Legal Debt Elimination Scam

This debt scam is a beauty. The term "novation" is used in contract law to describe the replacing of one party to an agreement with another party. The debt elimination scam involving "novation" goes something like this. A third party company (the scammers) will offer to replace you in the agreement you have with your credit card company (or other unsecured creditor, but it is usually a credit card company). They do this by sending a payment on your account with an amended contract that among other things, states that the company is taking over your debt. If the check is cashed by the credit card company then, under contract law, the new contract has now been accepted and you are no longer the debtor. Well, at least this is the theory. You can read more about this "apparently" legal credit card debt elimination scam here.

Advance Fee Loan Scams

This debt scam preys upon those who believe that they should get a new loan to "pay-off" their existing debts. Well, let me start by saying that if you consider using this strategy, you aren't "paying-off" anything. You are merely "shifting" your debts from one lender to the next. But that's another story. (Learn more about debt consolidation loans here.)

This scam is targeted at people who are looking for bad credit debt loans, but can't get them from typical sources like a bank, due to poor credit etc. Knowing that these folks are desperate, the scam artists advertise large loans for people with bad credit. When people inquire they are told that they can get the loan if they pay a "loan origination fee" along with their application. Of course the loan never materializes and the "application fee" is never returned.

Christian Debt Assistance

If a company is Christian based then it must be trustworthy, right? That's what many people believe, and that is certainly what some debt scams rely on. The problem is, how do you know if Christian debt services are truly Christian based?

As far as I can ascertain, any company can claim that they are "Christian based". And the problem is, many companies do just that to get your business. A well placed picture of a cross or dove on their website along with a bible verse and voilà!, a Christian debt assistance company is born.

Now, I am not saying that you avoid companies that claim to be Christian based. Not at all. But what I am saying is be aware that there are many people and companies that will try and take advantage of your religious beliefs in order to get your business.

Non Profit Debt Assistance

I might as well talk about non-profit debt assistance companies while I am on the subject of "misplaced trust". Many folks equate the term "non profit" with something that is trustworthy and free. Don't be fooled!

Again, I am not saying that you should not deal with non-profit debt assistance company, or that they are not trustworthy. What I am saying is, just because they are a non-profit organization does not mean that they are either trustworthy or inexpensive. In fact, many companies seek non-profit status for less than altruistic reasons like skirting telemarketing laws etc.

Other non profit debt help companies pay their executives huge salaries that are well beyond the industry norm. Or, these non-profits are just the marketing arm that funnels business to for-profit companies owned by the executives of the non-profit. Read more about these type of debt scams and dealing with nonprofit credit counseling services here.

Debt Consolidation Loan Bait And Switch

When faced with debt problems, one of the first solutions that most people think of is consolidating their debts using a new loan. The idea being that if they could just get a big fat new loan at a nice low interest rate, and use it to pay off all of their existing high interest debt, life would be good again.  Well, unfortunately this is rarely a solution that works out as outline in my debt loans article.

The reality is that these same folks find out quickly that since they are already in debt trouble (causing their credit to suffer at the same time) it is very difficult to qualify for the type of debt consolidation loan they are looking for. Instead, they are sometimes sucked into bait and switch loan scams by companies offering large loans (sometimes $25,000 and higher), to people with poor credit. In the end what is offered is more along the lines of a debt consolidation payday loan. The principal amount is small (usually around $1,500) and the interest rates high (usually higher than what they are already paying on their credit cards).

Bankruptcy Lawyers Advertising Debt Consolidation

If you are a potential candidate for a debt consolidation or "debt management program", you are also a potential candidate for Chapter 13 bankruptcy. And the bankruptcy attorneys know this all too well.

Their advertisements offer free "information on debt consolidation" hoping to attract potential clients needing debt assistance, who may eventually end up filing bankruptcy. The only good thing about this is that many people who end up in debt consolidation programs may have been much better off if they had filed Chapter 13 in the first place. But this does not make up for the deceptive advertising nonetheless.

Who's Behind Consumer Credit Counseling Services?

Not-for-profit credit counseling companies that are members of the National Foundation for Credit Counseling or NFCC are called Consumer Credit Counseling Services. But are they merely wolves in sheep's clothes? And why would I think this? For two reasons:

  1. These organizations rely on hefty donations from the credit card companies (yes they are funded by the same companies that hold your debt) in order to operate.
  2. They (the credit counselors) are often paid a percentage of the amount of debt that is paid back to credit card companies by consumers that are enrolled in their debt assistance programs. In other words, a kick-back.

Free Consumer Credit Counseling

Free consumer credit counseling is not only a reality, it is something that should be offered to you by debt consolidation companies regardless of your intent to join, or ability to pay for, any paid debt assistance programs that they offer. With this in mind, beware of debt consolidation companies that either a) do not offer  free credit counseling, or b) only offer it if you agree to sign on to their debt management program (which is not free).

Finding Debt Assistance Without Being Scammed

They first key to finding debt assistance without being scammed is to realize one very important thing. The success of any debt elimination program depends mostly on you. Sure, debt relief companies can help guide you, and do some negotiating on your behalf, but most of the "heavy lifting" still falls on your shoulders. So if a company or individual promises to "make your debt go away" with little or no effort on your part, there is usually a "catch". And you end up being the one "caught" in the scam.

The second key to successful debt assistance is to educate yourself. And that means educating yourself about your own finances as well as what "legitimate" debt help options are available to you.

If you focus on these two "keys", and watch out for the debt assistance scams we have discussed above, you will be well on your way to conquering your debt.


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