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Wednesday, May 4th, 2011

Be Wary of Credit Repair & Debt Settlement Promises

To consumers struggling to make ends meet, advertisements for credit repair or debt settlement may sound like the perfect solution to their financial woes. But in some cases, these services do little or nothing for consumers’ debt problems and instead sap their finances and leave them in need of bankruptcy protection.

Before you sign up for any service that promises to improve your credit, make sure you understand the potential risks involved in such offers.

Credit Repair Scams

Credit repair offers (which are often scams) generally advertise their ability to “wipe out negative information” on a credit report or provide a “quick and legal” way to improve your credit. But the truth is this:

  • You can remove negative information yourself…if it’s false: You don’t need to hire an outside company to remove mistakes from your credit report. Rather, visit annualcreditreport.com and request a free copy of your report. If you see any information that doesn’t belong, simply follow the site’s instructions for contesting the information and the responsible parties will take steps to remove it.
  • Only time can erase true negative information: On the other hand, if your credit report contains damaging information that is correct (e.g. that you’ve missed payments, defaulted on a loan, or something similar), only time (and positive credit behavior) will ease the information’s impact.
  • A blank credit report isn’t good news: Even if a credit repair company managed to erase all negative information from your credit report, having a blank credit report might be a disadvantage for you. Why? Because without any credit history at all, potential lenders are unable to make an assessment about whether or not to lend you money.

Debt Settlement (Scams)

Another commonly advertised financial service is debt settlement. While some debt settlers are legitimate and can be helpful to those in financial need, others are less scrupulous and simply take customers’ money without helping them much in exchange. Here’s the truth:

  • You can settle your own debts: If you’re struggling to keep up with or have fallen behind on some bills, your creditors may be willing to negotiate with you. Why? Because in many cases, creditors stand to make more money from settling a debt (say, for an amount less than the total owed or for a lowered interest rate) than from a customer’s bankruptcy filing.
  • You shouldn’t have to pay upfront fees: Recently passed rules from the FTC mandate that debt settlement firms cannot charge upfront fees for their services in most cases. Some debt settlers, it seems, were taking payments from customers but putting little or nothing toward actual creditor payments.
  • You have a legal obligation to pay your debts: Part of the agreement you have with any lender is that you will pay the bill for any debt you incur – that’s why you have to sign a contract before anyone will loan you money. If a debt settlement company suggests that you will face no legal repercussions from withholding payment from your creditors, be suspicious: in many cases, that’s simply not true.

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Posted in Your Credit Score | 1 Comment »

Wednesday, April 27th, 2011

Mortgage Scammers on the Loose

Despite the best efforts of groups like the Better Business Bureau and the Federal Trade Commission, scammers manage to find new ways to take money from unsuspecting consumers on a regular basis. Here’s a look at one of the latest warnings that’s been posted by consumer advocates.

A New Mortgage Scam Afoot

The latest in a long line of mortgage and foreclosure “rescue” scams seems to be one that involves attempting to trick homeowners into thinking they qualify for money from a lawsuit against their lenders. According to the BBB, the scam works like this:

  • An official-looking letter arrives: Victims have reportedly noted that they received a letter indicating that they were eligible to join a “joinder action suit” against certain mortgage lenders and banks. The letters noted the potential for winning significant financial compensation in the suit.
  • Unrealistic promises: Victims who called the number listed on the letter were apparently directed to employees of the scammer, who falsely suggested that, by joining the suit, victims might win thousands of dollars, have their interest rates slashed to two percent or have their mortgage principal reduced by 80 percent.
  • Request for upfront payment: In classic scam fashion, victims were then told that they must pay a $5,000 retainer fee to ensure their spot in the lawsuit.

Unsurprisingly, none of the information presented in the letters or during follow-up phone calls was true. But what many victims found disturbing was that the scammer had access to their personal information, including name, address, loan information and even loan amount. In other words, this particular scam may have seemed frighteningly legitimate.

How to Spot a Scam

If you’re among the millions of Americans currently struggling with your mortgage, be sure to follow these safety tips (from the BBB) if and when you decide to seek mortgage assistance.

  • Go directly to your lender first. Third-party “relief” providers, especially those that approach you unsolicited, are much less trustworthy and much more likely to take your money and offer you nothing in return.
  • Be suspicious of mailings from strangers. If you receive a letter about any class action or mass joinder lawsuit, be sure to check online to learn about the latest scams. Then, contact your bank or connect with a lawyer to assess the nature and legitimacy of the letter.
  • Shy away from advance fees. Thanks to new consumer protection rules that took effect this year, advance fees are only permitted in rare cases. In many cases, those that ask for money upfront are interested only in your money and may not stick around long enough to provide the help they promised.
  • Beware of forensic loan audits. These are hot scamming ground and often have no effect on a person’s mortgage payments.

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Posted in Home Foreclosure | No Comments »

Thursday, June 25th, 2009

Credit Card Scam Alert: Unsolicited Calls from Machines

Receiving telemarketing calls can be annoying, but receiving unsolicited calls from non-human callers is even worse.

And, according to this recent report from MSNBC, one scam currently plaguing the U.S. and Canada could cost you significant money.

The Promise: Lower Interest Rates

Apparently, these calls work by alerting you that nothing is wrong with your credit card account, but that it is “urgent” or “imperative” that you contact the calling company to lower your credit card interest rates.

Here’s how you can tell calls like this are bogus:

  • Company not identified: The automated calls reportedly do not include the name of the company supposedly offering to help you lower your rates. Red flag number one – any legitimate company wouldn’t hide its identity.
  • Calls at strange hours: The Fair Trade Commission (FTC) has outlined strict rules for telemarketers, and one is that they cannot call after 9 pm local time. Any unsolicited business calls later than this are illegal and should be reported.
  • Demands for personal information: Legitimate companies do not require you to give your Social Security number or credit card account information over the phone. If anyone calls and asks for this sort of info, hang up – you have no way of knowing who’s on the other end of the line.

The Catch: Upfront Fees and No Real Services

Many consumers have already lost money to this type of credit card scam – and it’s no wonder, considering what it offers.

Many Americans could benefit from lowered interest rates on their credit cards, so the offer appeals to unsuspecting victims. Here’s how the scam works:

  • Upfront fees for "services": The companies charge fees in the ballpark of several hundred dollars, insisting that such fees are fully refundable if the consumer isn’t happy with results.
  • Consumer pays and loses: Unless you have a promise in writing that you’ll get your money back, you can expect to part with it forever. And, according to sources, some unfortunate individuals already have.
  • No work done: Unfortunately, the company isn’t likely to negotiate with your card issuers at all, meaning that you’ll have paid them for nothing. And, even if they do “negotiate,” they’re likely to do no more than call and ask for a lower rate – which you can and should do yourself (for free!).

What to Do if You’re Victimized by a Credit Card Scam

If you receive an automated call offering you lowered interest rates on your credit cards, take action by filing a complaint with the FTC at ftccomplaintassistant.gov.

Reports show that the three companies behind these calls (CSTR Solutions, Genesis Capital Management and Mutual Consolidated Savings) all have failing ratings from the Better Business Bureau.

And the FTC apparently knows about the scams, and has recently prosecuted other companies for similar violations of consumer protection laws.

Similar Scams Have Led to Some Folks Filing Bankruptcy

Unfortunately, some scams have led to people going broke and filing bankruptcy to get out of that "scam debt".

If you've been victimized by a scam and are considering filing bankruptcy, visit www.TotalBankruptcy.com to connect with a sponsoring bankruptcy lawyer for free.

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Posted in Finance 101: Secure Your Future | 1 Comment »