Description: Following some simple tips and knowing some warning signals can help you stay away from a scam debt counseling company.

Debt counseling scams: How should you avoid them?

Debt counseling or credit counseling is a valuable service for people struggling with debt problems. Counseling agencies offer tips on debt consolidation and money management. They also help you set up a repayment strategy with your creditors to get rid of debt. Unfortunately, there are some scam debt counseling agencies. Unsuspicious consumers often fall prey to them and lose their money. They can unlawfully take your money, ask for exorbitant fees and put you into a bigger debt trap.

How can you prevent falling prey to a scam debt counseling company? How can you select a trustworthy counseling agency? The tips and red flags given below might help:

Claiming non profit status

Many counseling agencies declare themselves to be non profit just to instill confidence and trust in consumers. Non profit status doesn’t imply that their services are for free. Question about the fees charged by the company. Is there a setup fee? Do they keep the first monthly payment with them? A genuine counseling agency would ask for moderate fees. If a company is asking for hundreds or thousands of dollars for setup fees, then it’s possibly a scam.

Mode of remuneration

Find out how the employees of the agency are remunerated. If they receive salaries then it’s ok. But if they work against commissions or bonuses then they might push you towards a consolidation program that you can’t manage to afford. Legitimate counseling agencies would always offer cost-effective solutions to you.

Ask your creditors

See whether your creditors are willing to work with the agency. Find out if they’re ready to negotiate with the agency you’ve chosen. Don’t fall for unbelievable promises. Talk to your creditors in detail.

Have everything on paper

Just ensure that you receive all the terms and assurances on paper. Don’t go for a verbal agreement since it’s not obligatory.

Track your progress

Just be sure that the agency gives you monthly statements from which you can find out how much have been paid by you and where the payments have been directed. Confirm this personally and don’t blindly rely on their words.

Unresolved complaints

Verify with the Better Business Bureau or your local Chamber of Commerce to ensure there are no pending complaints against a particular agency. It’s natural to find a lot of complaints against scam agencies so it’s wise to make queries.

Always take your time, research well and ask questions and you would get a trustworthy debt counseling agency that can help you get out of debt. There’s no logic why you should fall prey to a scam company.