Getting help fast may be all you care about when faced with a financial crisis. Looking at the barrage of advertisements in print, on television and across the Internet, it would appear there is no lack of companies ready to help you get out of debt. Think twice, however, before committing to any agency and proceed with caution. While some have your best interests at heart, just as many are trying to lure you into a credit balance write-off scam.
Identification Issues
Part of the problem in identifying unscrupulous organizations is the variety of categories in which they exist. You can find credit balance write-off scams listed under names like credit counseling, credit repair, debt management, debt negotiation or debt consolidation. In addition, many of these companies are nonprofit organizations. The Federal Trade Commission Consumer Protection Division warns that nonprofit status is no sign the company is ethical or legitimate. One point these organizations have in common, however, is the offer of a "quick fix." Each one promises to negotiate the credit balance down to pennies on the dollar or eliminate your credit balance altogether.
Features
Features common to credit balance write-off scams include requiring you to provide personal financial information in exchange for additional information, immediate acceptance into the program and high front-end fee requirements. Advertisements normally include few details but provide a telephone number and encourage you to call for more information. When you do, the company first asks for information like credit card balances and account numbers. Acceptance into a program without taking the time to review your financial situation is a common feature these organizations share. Fees companies charge before performing any type of service can be exorbitant. MSN Money Central reports front-end fees can be $2,500 or more.
How It Works
The first step in the process is the initial phone call. The company sales pitch contains statements that sound authoritative, and include out-of-context quotes from legal documents and court rulings. After the sales pitch comes the request for payment of front-end fees and your delivery of personal financial information. The company then sends you a certificate to present to your bank. They claim the certificate absolves you of your responsibility to repay debt, such as your mortgage and credit card debt.
Effects
Credit balance write-off scams can leave you in worse shape than you were in originally. In addition to losing the money you paid the agency in front end fees, you will still be legally responsible for debt you incurred, as well as finance charge and late fees. Failing to make mortgage payments can lead to foreclosure. Involvement in a credit balance write-off scam, whether intentional or not, can also lead to federal fraud charges against you. The Federal Reserve Board requires banks to confiscate documents and forward a suspicious activity report to the FBI for further investigation.
Solution
Before accepting or signing any agreement or providing personal or financial information, investigate the organization through the Better Business Bureau and your state Attorney General. If you fall victim to a credit balance write off scam, file a complaint with FTC. The FTC can, and does, prosecute companies that engage in fraudulent credit repair scams. As an example, in 2006 the Federal Trade Commission, in conjunction with the U.S. Postal Service and law enforcement agencies in eight states ran a crackdown they called "Project Credit Despair." This resulted in stopping 20 fraudulent credit repair agencies and sent a clear message to the rest.
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