Debt relief scams can be devastating if you’re already struggling with financial hardship. Scammers often target vulnerable people by promising fast or guaranteed results.
Here are some of the most common types of these scams you should watch out for:
1. Advance-Fee Scams
In this scam, companies ask for upfront fees before providing any debt relief services. Once they collect the money, they either disappear or fail to deliver on their promises. Legitimate debt relief programs should not charge fees before performing any services.
Red Flag: Requests for payment before providing any services or promising to settle your debts.
2. Debt Settlement Guarantees
Some companies promise to settle all of your debts for pennies on the dollar. While legitimate debt settlement is possible, no company can guarantee specific results. In many cases, scammers will take your money and leave you with unresolved debts.
Red Flag: Any program that guarantees debt settlement outcomes or suggests avoiding communication with creditors.
3. Debt Consolidation Loan Scams
Fraudsters offer “debt consolidation loans” with extremely favorable terms, but they require an upfront fee to process the loan. Once you pay the fee, the loan never materializes. Be wary of loan offers that require you to pay money before receiving funds.
Red Flag: Requests for upfront payments to secure a loan or vague loan details without verifiable information.
4. Fake Credit Counseling Agencies
Some scammers pose as nonprofit credit counseling agencies to trick consumers into providing personal information, such as Social Security numbers or bank account details. These fake agencies then use the information to commit identity theft or charge unauthorized fees.
Red Flag: Agencies that do not have accreditation or cannot provide verifiable information about their services.
5. Debt Elimination Scams
Scammers claim that they can “eliminate” your debt entirely, often by promoting the false belief that debts are illegitimate or do not have to be paid back. They may offer to use legal loopholes or suggest that you stop paying your creditors, which can worsen your financial situation.
Red Flag: Claims that they can “erase” or “eliminate” your debt completely without repayment.
6. Government Program Scams
Fraudsters may impersonate government agencies or claim to offer government-backed debt relief programs, such as special grants or forgiveness programs. In reality, they are just trying to collect your personal information or charge you for services you could access for free.
Red Flag: Companies claiming to be affiliated with government programs or charging fees for “government debt relief services.”
7. Debt Relief Email and Phone Scams
Scammers may reach out via unsolicited emails, phone calls, or texts, offering debt relief solutions. They often pressure you to act quickly, ask for personal information, or demand immediate payment to access their services.
Red Flag: Unsolicited contact or pressure to act immediately, particularly if the offer seems too good to be true.
If you encounter any of these scams, here is a resource on how and where to report it.
How to Protect Yourself:
- Research the company: Check reviews, verify accreditation, and look for complaints on websites like the Better Business Bureau (BBB) or Federal Trade Commission (FTC).
- Never pay upfront fees: Legitimate debt relief services will not ask for payment before performing any services.
- Get everything in writing: Make sure you have a clear contract outlining all terms before agreeing to anything.
- Avoid companies that guarantee results: No reputable debt relief service can promise specific outcomes, such as wiping out all your debt or settling for a particular amount.
Bottom Line
By recognizing these common debt relief scams, you can better protect yourself from fraud and ensure you’re working with a legitimate company.
