A recent study by the Better Business Bureau revealed what is being called a concerning trend: as North Americans grapple with trillions in debt, some are lured by firms promising debt reduction or credit repair. Many of these firms overpromise and underdeliver, exacerbating the financial woes of those already in vulnerable positions.
The 2023 study found some predatory companies fail to deliver on big promises. Exaggerated promises and exorbitant fees have emerged, and the BBB had logged more than 11,000 complaints and 1,000 negative reviews about these services.
These predatory firms are concentrated on the West Coast, according to the BBB.
Leslie in Carson City, Nev. hired a debt consolidation company to help pay off her debt in four years. She was told to stop making payments to creditors and to stop taking their calls. In the process, her credit score dropped around 200 points, and creditors called up to 20 times daily.
“The predatory companies swoop in and make things worse, all under the guise of helping,” she said.
A handful of consumers relay positive encounters with debt relief businesses, but a common narrative is one of deception, lost money and increased debt.
BBB offers tips for consumers considering debt relief or credit repair:
- Use AnnualCreditReport.com to get a free credit report.
- Don’t pay or provide payment information until service is rendered.
- Critically examine any guarantee made. Few, if any, companies can ensure a credit or debt company will agree to negotiate with them or adjust reports.
- If you are in default, call debt holders yourself and attempt to negotiate a lower debt payment.
- Check monthly bank statements to avoid recurring charges from companies.
- Search online for free information.
- Don’t be rushed. Unscrupulous businesses and scammers both use high-pressure tactics.
- Avoid giving away personal banking information until you are 100% certain a company is legitimate.
- Refuse to work with companies that won’t tell you your rights when it comes to credit repair or debt relief.
- Be wary of anyone claiming to be associated with a government agency.
Where to report
- Better Business Bureau or BBB Scam Tracker
- Federal Trade Commission (FTC) or call 877-FTC-Help
- Find your state Attorneys General online.
