How Can I Identify Fraudulent Debt Consolidation Firms?

You must have heard of people who landed themselves in a terrible financial mess while attempting to improve their financial situation with debt consolidation loans. Many of such ones must have fallen as preys into the hands of fraudulent debt consolidation firms out there. But I don’t want you to have a similar experience. Hence, I am providing you with these useful tips on how to identify fraudulent debt consolidation firms and avoid any involvement with them.

TIP 1: UNLAWFUL PRACTICES: Some consolidators actually encourage their clients to employ fraudulent means to lower their debt and improve their credit. Such consolidators, without being told are representatives of fraudulent debt consolidation firms. And if anyone cuts a deal with them, he/she will be equally held liable for prosecution whenever the law catches up with such dubious organizations. So, you should beware of companies that encourage you to contest every credit flaw on your report, regardless of whether or not the penalty is legitimate.

TIP 2 : LARGE UPFRONT FEES OR AN UNCLEAR PAYMENT STRUCTURE: Most debt consolidation firms charge an upfront fee of about 10% of the total debt you plan to eliminate. So, if a company is charging you more than this, find out whether the increased charges are due to some specific added services. And if not, don’t, go further with such a deal. And more importantly, always ask for a complete list of service fees to enable you have a clear idea of exactly what a service will cost you before you sign an agreement. Most fraudulent debt consolidation firms will not be able to provide you with such detailed list of service fees, and that is a red flag that you must not ignore.

TIP 3: NON-PROFIT STATUS: Some of the best debt consolidation firms are non-profits which makes them appear more trustworthy. Thus some others abuse or even lie about their non-profit status in other to bypass telemarketing laws and pose a trustworthy image to the general public. If a company claims to be non-profit, ask them for proof of their 501c3 status. If they are unable to provide it, take that as a red flag.

TIP 4: APPEARS LOCAL BUT ISN’T: Some debt consolidation companies that are based in other countries may provide you materials that would make them appear to be a local company in an attempt to boost their appearance of legitimacy. Always do a diligent research about any firm you wish to cut a deal with and its infrastructure at Better Business Bureau.

TIP 5: TELEMARKETING: Be always leery of any firm that contacts you through telemarketing. If you wish to use their services, make sure you research about their true identity at Better Business Bureau and then get their direct website address and open your account through it, not through any other link that they might have used to contact you.

TIP 6: SERVICE HOURS: Make sure the company you wish to use is opened during normal business hours. You may want to try their live customer service number to test how difficult it is to get a hold of a real person. Be sure to use the number for current customers, not potential customers, as service levels could vary between the two.

That is it. If you can combine these tips with the resource in my last post ‘How To Find A Trustworthy Debt Consolidation Firm' and properly utilize them, trust me, you will not fall victim to any of those fraudulent debt consolidation firms out there.