Cash-strapped consumers are being warned to be on the lookout for unethical practices conducted by debt settlement companies. Many companies claim they can help struggling consumers reduce their debt obligations with creditors for a nominal fee. While there are a variety of companies that claim to offer such services, unsuspecting consumers could end up losing money and wind up in deeper financial ruin.
The National Association of Consumer Bankruptcy Attorneys recently published an alert to consumers regarding debt settlement offers. There are a variety of legitimate debt settlement companies that offer debt negotiation services to help consumers. Yet, there are also companies who continue to operate by unethical standards including charging high fees and advising clients to stop making payments to their creditors.
The bankruptcy group advises consumers to proceed with caution when considering services of a debt settlement company. Many consumers who seek services for debt relief through these companies see their finances take a harder hit when the debt settlement company charges penalties and interest for their services. Some debt settlement companies scheme toward getting consumers to eventually break their agreement with creditors, and in turn, stop making payment toward their debt obligations.
The bankruptcy group advises consumers to avoid companies that make claims that are too good to be true. This may include companies that make claims of being able to pay off unsecured debts with large discounts, charge monthly fees or even demand payment from the consumer in the amount they claim they will save them.
The warning comes after the Federal Trade Commission filed multiple lawsuits in September in 3 states in relation to mortgage modification and loan scams that claimed to help borrowers.