Laptop with hand held phone and credit/debit card

In the first quarter of 2023, total household debt in the United States rose to $17.05 trillion, with roughly 1% of that debt being at least three months delinquent. As debt and delinquencies increase, so does the number of people eagerly searching for viable debt relief solutions, increasing the pool of potential targets for opportunistic scammers.

Debt relief scams can be hard to identify, but you can protect yourself by learning how to recognize them – and where to find reliable assistance instead. Here’s what you should know.

Understand Debt Relief Options

There are many types of debt, such as credit cards and car loans. Debt relief is the adjustment or forgiveness of debt in any shape or form to make it more manageable. The most common debt relief options include:

  • Debt settlement. The creditor or debt collector agrees to settle the debt for a lump sum that’s less than the total amount you owe. You may owe taxes on the portion of your debt that’s forgiven.

  • Debt consolidation. Debts spread across multiple accounts are paid using funds from a single personal loan, simplifying your payments and potentially securing a lower interest rate than the debts had before.

  • Used only in extreme cases, personal bankruptcy is a legal process that declares that you are unable to pay your debts. How it affects your debts, assets, and finances depends on the type of bankruptcy you file.

Identify Debt Relief Scams

Debt relief scams come in many forms. Some scammers may appear to be legitimate businesses, only to take your money and never do anything to help you. Others might pretend to be an actual, well-known debt relief business in order to get your personal or financial information.

Knowledge is your strongest defense against scams. Many debt relief scams will display at least one red flag, like:

  • Upfront payments. It is illegal for a debt relief business to demand payment before settling or resolving your debts.

  • Promised debt forgiveness. Real debt relief solutions typically involve long negotiations, and no outcome is guaranteed.

  • Skipped documentation. Legitimate debt relief services will require you to submit extensive paperwork and documentation detailing your financial situation so they know if and how they can help you.

Other general warning signs to watch for include aggressive pressure to work with their company, urgency to rush you into an agreement, and requests for payment through gift cards or other unusual means.

Avoid Getting Scammed

In addition to keeping an eye out for warning signs, you can take other steps to minimize the chance of falling victim to a debt relief scam.

  • Do your research. When searching for reliable debt relief services, look for businesses that are BBB-accredited, have years of documented experience, and have numerous reviews and testimonials that are mostly positive.

  • Understand debt relief law. The Federal Trade Commission’s Telemarketing Sales Rule requires debt relief programs to disclose how long the debt relief process will take, how much it will cost you, and how it could impact your finances or credit. They aren’t allowed to make false or unsubstantiated claims about their services, such as guaranteed success. Scammers will often withhold key information or market their services as foolproof.
  • Protect your personal information. If you receive unsolicited communication from a debt relief provider, don’t give them your personal information. If the communication appears to be from a company you trust, hang up the phone or ignore the email, then verify that the request is legitimate by contacting that company directly through its website or at the phone number on its website, not the link or phone number provided in the communication or on your caller ID.

Find Real Relief

Your first step toward debt assistance is to contact a trustworthy credit counselor through the National Foundation for Credit Counseling or your local financial institution. They’ll help you understand your options and can connect you with additional resources.

Local agencies can also help you. Before working with a debt relief company, check its complaint history with your local consumer protection agency and ensure that it is licensed per Tennessee law with the state regulator or attorney general’s office.

Take the First Step to Financial Freedom

Don’t let debt relief scams pull you in. Protect your financial information, watch for warning signs, and do your due diligence when searching for solutions.

If debt consolidation could ease your financial burdens, let Citizens Bank help you on your journey. Our personal loans can help you consolidate your debt into one simple monthly payment. Reach out to your local branch to learn more.