Promise of 'one monthly fee' was really a scam
Updated On: Sep 25 2013 10:15:00 PM EDT
Business has been booming for debt settlement companies throughout the nation. If that's something you are considering, you need to be very careful which company you choose.
"They were telling customers 'hey you have all of this debt, we can settle it for approximately 45% of the debt'," explained US Postal Inspector Robert Clark.
Clark says thousands of people carrying credit card debt jumped at this offer.
Clark explained, "Customers who have all this debt are like 'you mean I have $50,000 in debt and I won't have to pay back $22,500, yeah that's what you do'."
Authorities say the debt settlement firm in this case asked its clients to sign a contract and trust the company to manage their debt.
Clark explained their pitch. "Stop talking to your creditors. Make one monthly payment to us and as long as you can afford to make one monthly payment to us, sign a 3-year contract or a 4-year contract whatever works for you and in that time all of your debt will be paid off and you won't have to worry about it."
The problem: From 1,200 customers, the company allegedly collected $2.2 million in fees and didn't pay off any of their debt.
"Some of the victims we have spoken to admitted I didn't even ask what the fees were so enamored with the fact that they could stop paying off all the cards and one affordable monthly fees," said Clark.
In fact, if a customer asked questions about fees, the operator was prepared.
"Salespeople were instructed initially to say "our fees are included in the program". And that's it. If the consumer pressed they would say well, our fees are $49.00 a month," explained Clark.
The company's owner was allegedly not concerned.
Clark said,"His motto was 'just get them signed up' we'll deal with all of the complaints afterwards, just sign them up."
Postal Inspectors say there are ways to determine whether a debt settlement firm is legit.
"If they disclose all of the fees up front and they aren't trying to rush you through the contract it may be a more legitimate business," said Clark.
Also you should know that there's a new law in place the requires debt settlement firms to meet with you in person to sign a contract.
"So if you have a company that emails you a contract that is another red flag," said Clark.
And keep this in mind: You can negotiate payment terms with your credit card company, on your own.
"Contact the credit card company that should be the first step and say hey look this is my situation can you work with me? A lot of times they will agree to do different things for you to help you because in the end they want to be paid," said Clark.
Postal Inspectors say it's easy to target people with high credit card debt or anyone having financial problems because they are often desperate for an answer. In most cases, debt settlement firms buy a so-called lead list, which has phone numbers of consumers carrying excessive debt.
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