It's happened countless times in Canada with dishonest
consumer credit counseling services:
Consumers gather their bills, swallow their pride, and
shell out cold hard cash for help in clawing their way out
of debt by using debt settlement services or a debt
management program, only to be taken to the cleaners by the
very people trusted to helping them improve their financial
situation.
The culprits in these schemes? Bad apple consumer credit
counseling services whose agenda isn't in helping you, but
helping themselves - to your cash.
Let me start by stating that many consumer credit
counseling services are honest, but there are a few out
there that are interested only in enriching themselves at
your expense. It only takes one bad one to spoil the bunch.
Consumer credit counseling services routinely try to
negotiate reduced interest charges and late fees to quickly
take a bite out of your debt. By negotiating these
reductions and consolidating all of your payments into one
payment you can make to them once or twice a month, in
theory you can save money and get out of debt more quickly.
The debt settlement service then makes payments to your
creditors on your behalf.
Here are some of the tricks the bad ones use - and how you
can protect yourself.
1. The unscrupulous debt counseling services will apply
your first payment to their fees, instead of forwarding it
to your creditors. When this happens, not only do they
usually "forget" to disclose this fact to you, doing so
will result in your getting hit with late fees by your
creditors. You can avoid this situation by finding out in
writing what their fees are and how they'll be paid.
2. This next tactic flies in the face of logic if you're
trying to claw your way out of debt and improve your credit
situation, but some debt consolidation companies make
payments on your accounts based upon their own schedule,
regardless of when the payments are actually due. If this
happens to you, your credit scores will sink a little
farther and you'll probably have to pay a late fee, which
will result in higher account balances.
3. The third most popular scam is the most egregious.
Instead of making the payments you've entrusted them to
make, a fly by night debt consolidation company will take
your money and completely skip making the payments. When
confronted with the charge that your payments were never
made, they will claim that it's a computer glitch or the
"check is in the mail" -- all the while continuing to take
your money each month.
After a few months of this activity, they'll disappear into
the night and your chances of recovering your money will
evaporate. They'll be richer and you'll be left holding a
stack of unpaid bills and a credit report that looks like
it's been in a bar fight.
Here's what you should do.
You can help protect yourself from this situation by
thoroughly checking out any debt management program you're
considering. A good place to start is with the Better
Business Bureau http://welcome.bbb.org/ and with Credit
Counselling Canada. http://www.creditcounsellingcanada.ca
Once you've signed on with a debt management program, check
with your creditors yourself to ensure that scheduled
payments have been made. If they haven't, immediately
contact your local law enforcement agency and quit paying
the debt settlement service immediately.
It's one thing to swallow your pride and acknowledge that
you have a problem with debt - it's another thing
altogether to realize too late that the bitter taste in
your mouth is the residue from an expensive lesson learned.
----------------------------------------------------
Darrin Roseborsky is a Refinance Specialist with OMAC
Mortgages, seminar speaker and president of
HomeRefinanceCoach.com. Darrin shows people how to MAXIMIZE
their equity PROPERLY and how to choose options that make
the MOST SENSE for their situation! An example of exactly
how this works, is at: http://www.homerefinancecoach.com
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