If you have chosen to hire a debt management company to help with your debt relief efforts, you need to be careful about who you will choose. Almost all finance related services have scammers posing as legitimate companies. You should avoid being a victim and this article will help you with that.
To choose the right company to entrust your debt problems with, start by reading the Telemarketing Sales Rule or TSR. This is a law imposed by the FTC or Federal Trade Commission to protect consumers from being scammed out of their money. It details the do’s and don’ts of debt relief companies in general.
First of all, you should scrutinize the services that they provide and the associated fees. Legitimate companies will provide free initial consultation. They will never charge you with upfront fees. That is one of the prohibitions of the TSR. If the company you are talking to is asking this from you, walk away. There is a high chance that they are scammers.
A debt management company will assign a debt counselor to work with you. They will help you with a debt management plan (DMP) that is based on your financial capabilities. One of the first things a counselor will do is analyze your finances before coming up with a solution. If a “debt expert” insists on a solution before looking at the figures on your financial sheets, then be wary about their intentions.
Once you have a plan, they will take over communication with your creditors so you are left in peace to grow your debt payment fund. They will propose the payment plan – which usually shows lower monthly dues. Once the creditor accepts, you will send a single payment to them and they will distribute it to your various creditors – based on what is listed on the DMP.
The only fee that they will ask from you is a monthly service charge for helping with the distribution of your payments. The maximum amount set by the government is $50. Anything beyond this should be questioned.
Also, anyone who promises and guarantees that they will lower your interest rate is in violation of the TSR. They cannot make false promises. At the very least, they should just promise their best effort. But they cannot use this promise to get you to enroll your debts with them. Neither can they promise to reduce your debts. That is in debt settlement. Debt management will not reduce your debt balance. But they will help you lower your monthly payments.
Be cautious about companies who tell you of plans for debt quick fixes. There is no such thing. Any debt relief program will require sacrifices from you – even bankruptcy. Anyone who tells you otherwise may be thinking about scamming you.
There are many legitimate debt management companies out there who will help you get out of your debt problems. There is no foolproof protection against them – except of course, strict due diligence. Ask questions, check out associations and affiliations, and read client reviews. It pays to do a background check always.