Protect Yourself from Credit Repair Scams

Every disaster seems to breed its share of con artists and scammers trying to make a buck off the misfortune of others. America’s financial meltdown is no exception. Shady outfits advertising fast, cheap credit repair on radio spots and late-night television ads are preying on Americans who are smothering in credit card debt or who are on the verge of losing their homes to mortgage default. Desperate to find a way out of the financial quagmire in which they are mired, these people are easy prey for shady operators posing as legitimate credit restoration agencies.
A constant stream of ready customers for credit repair con artists is ensured by still high unemployment rates and undervalued real estate markets. Savings dwindling or gone and bills piling up, Americans at the end of their financial ropes are lured by the hollow promises debt repair scammers make to get them off the hook with creditors. The National Foundation for Credit Counseling advises consumers to verify the credentials of a credit repair agent or business before providing any personal information or paying for any services. Despite their claims of stellar track records, less than 10% of late night credit repair advertisers actually help customers repair poor credit ratings or manage debt.
Scam techniques that should raise red flags and send consumers running are:

• Scammers tell you to stop paying creditors and deposit money into a special account while the credit repair agent negotiates settlements with your debtors.
• The hook scammers use is the promise to settle debts for considerably less than the actual balance due.
• The rationale used for depositing money into an account scammers set up is that the consumer will be able to pay off the entire negotiated debt in one lump sum.
• The reality is that scammers will withdraw 20% or more of the funds deposited as “service fees” without making any contact with your creditors.

A new law that recently went into effect finally offers consumers a modicum of protection. Debt repair agencies are now required to settle at least some of your debt before charging you. The only way to protect yourself from scammers and con artists is to solicit the services of a reputable credit repair agency.