RIP-OFF ALERT: Debt-settlement firms are allegedly masquerading as law firms and collecting retainer fees with the promise of reducing credit card debt to pennies on the dollars.
I despise these kinds of organizations. They have conned so many desperate Americans out of so much money that new rules had to go into effect late 2010 to change what these outfits are allowed to do. First, they can no longer collect money upfront. Second, there are restrictions about how they can contact people to impose their sleazy schemes.
People who are in credit card debt over their heads are susceptible to anyone who claims they can wave a magic wand and erase their debt. The con typically goes like this: “We can settle your debts for 8 cents on the dollar…but we need $3,500 upfront.” Then they take that money you pay and run.
A number of published reports now corroborate that debt-settlement firms are in fact pretending to be lawyers and charging a retainer upfront. The attorney general of North Carolina says that a Florida company stole just under $2 million with claims that the retainer they were collecting was for a law firm. But there was no law firm. Besides, Florida has long had a law banning advance-fee collection anyway.
Know this: No matter what fish story these people invent, the reality is that you’ll be ripped off by paying upfront to settle a credit card debt for pennies on the dollar. The only thing you’ll get will be more heartache.
There are 2 legitimate channels to use if you’re in over your head with credit card debt: The National Foundation for Credit Counseling at NFCC.org and the option of bankruptcy, which can be right in some situations, though you don’t often hear me talk about the latter one.