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Consumers should be aware of so-called ‘debt relief’ companies

| Apr 21, 2020 | Debt Collections |

There are quite a few companies running advertisements these days claiming to provide debt relief. Most of these ‘services’ provide no debt eliminations but instead can charge the consumer hundreds (or thousands) of dollars in fees resulting in higher debt than before. The claims of these companies espouse lump-sum payments to reduce the total amount owed, though most of these statements are often false or misrepresented.

The fraudulent statements of ‘debt relief’ companies

One of the tactics used by such companies is to cease payments to creditors by placing those funds into an escrow account created by the company. During this time, your creditors will most likely continue charging you penalty fees and late fees, all while accruing interest. This practice can increase your debt at a much faster rate during this period of suspended payments. Additionally, you may be subject to legal action by your creditors as they attempt to collect your delinquent debts. Here are some of the warning signs consumers should look out for with debt relief scams:

  • Up-front fees: If a company requires up-front fees before it provides a service, this activity is most likely a scam. Legally, for-profit debt settlement companies that rely on phone transactions cannot charge fees before they provide a tangible service.
  • Cancellation: Any money that you place into a debt settlement account is your money. This means that you are entitled to cancel the account for any reason and at any time. If a company attempts to prevent you from canceling your account or refuses to refund your money (minus service fees) this would, in most cases, be considered illegal.
  • Transaction forms: Your consumer protections may not apply to internet companies or face-to-face transactions. Despite the ethics of these sales tactics, if you sign up for a plan online, the company could legally charge you up-front fees.

State and federal debt collection regulations

The federal Fair Debt Collection Practices Act (FDCPA) and Washington State’s Consumer Protection Act (CPA) and Collection Agency Act (CAA) form the basis of consumer protections against predatory ‘debt relief’ agencies. The debt collectors and collection agencies regulated by these laws may not necessarily extend to medical debt or certain forms of credit card debts. If you’ve been financially harmed by a supposed debt relief company or the subject of predatory debt collection practices, contact an attorney with experience in debt collection cases.