How to be Cautious of Credit Counseling Companies
How to be Cautious of Credit Counseling Companies
A lot of clients come to an attorney after an awful incident with a credit counseling firm. Others are so bad that a watchdog document has been made about them by the Internal Revenue Service.
A list of signs that indicates a credit counseling firm is a scam has been compiled by the Federal Trade Commission. To protect people from becoming victims of these scams, the Congress passed the law called the Credit Repair Organizations Act.
Only a small number of these firms are operating legally. These firms are actually paid by the creditors and they have to make you pay the highest possible amount to your creditors.
The first warning that a firm is a scam is when they ask for payment right away. Based on the Credit Repair Organizations Act, until after you have fulfilled their services, the firm is prohibited to charge you.
The second warning is when you are forced to get a debt repayment plan instantly instead of offering you advice and counseling without charge.
In order to keep away from credit counseling laws, a number of credit counseling companies start as nonprofit organizations. Through this, they are deceiving the public that they are a firm with a good reputation. FTC closed down Ameridebt, which was originally nonprofit, because it was found out that they had charged more than $170 million to their clients.
Other warnings are when firms prevent you from communicating the three major credit reporting bureaus, when they don’t explain your legal rights, when they ask you to use an Employer Identification Number instead of Social Security Number, or when they inform you to argue all the contents of your credit report with the credit agency.
To avoid these scams, consult if the firm is part of Better Business Bureau and has high evaluation. You can ask help from your state Attorney General if you become a victim of these scams.
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Filed under: Credit • credit cards • Credit Score
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