I don't even know where to start, there are so many websites,
companies, and individuals out there that will misrepresent the
truth about credit card consolidation. Due to recent chaos in the
credit industry, it's only getting worse.
There are some organizations that do offer accurate and useful
information but you need to be wary of the following standard
tactics of the scammers.
1. If the organization or individual wants you to sign a
document that gives them the right to negotiate for you, don't do
it. Why? Most times this allows the other party to make decisions
without consulting you. They can cut any type of a deal, tell you
anything, and most likely make money off of the transaction.
2. If the organization or individual indicates you need to get
a loan from specific sources that they have "approved".
What this really means is that have a deal in place to get a
commission on any loans. Kick backs are very common in this type
of business.
3. If the organization or individual wants to make the payments
for you, don't do it. Why? You lose control over who gets paid
what and when. If this company fails to pay on time, you suffer
the consequences. Once again, they can cut deals and do what ever
they want that can make them money. Not to mention charging you a
"small fee", which is piled on top of what else you're
paying like interest and other charges from original debt holder.
4. Non-profit doesn't mean mean these companies don't make
money. This means that they have setup a legal entity that
receives certain status with the local and federal government.
Some are very legitimate in nature, some are not. As an example, a
non profit status can be maintained, but all of the "surplus
funds" are paid out in salaries, expenses, etc. So some may
be taking advantage of the status (legally) to not pay income tax
and use also as a means to promote the entity (any contribution is
tax deductible). So instead of charging you a fee, they call it a
voluntary contribution.
5. Require any up front fees that are required before they
provide you information on their services. Especially committing
you to a long term contract of "counseling or debt management
services. A common method is to tell you their is a
"processing fee" to review your accounts and
information.
6. Any organization that has a requirement for the amount of
debt you have, for example you may be told you need at least
$5,000 (usually even higher) in debt to sign up. The reason they
want you to have x amount of debt is that they know that they will
make more money the more debt you have.
7. If they tell you they can negotiate your debt from 10-50%
less than the amount owed. They can not negotiate a deal any
better than you can. There are some possibilities that your debt
can be reduced by eliminating some penalties or late charges. Many
money lenders are willing to be reasonable if you promise to bring
your account up to date or make a good faith payment every month.
There are legitimate organizations and individuals who can help
you at a very reasonable fee or even free of charge. Your local
church, community services, or volunteers may be available right
in your city or neighborhood. Local professionals (CPAs),
Financial Planners, could be another source to check out.
Credit card consolidation counseling may even be offered by
your local bank or credit union. I'd still keep an eye on the
bank, but credit unions usually are pretty reliable. Always check
with local State Attorney General's offices, they keep records of
complaints and local consumer protection groups are also a good
place to check. Better Business Bureaus do track complaints but
people often never file with them.
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