Some companies offering debt settlement programs may not deliver on their promises, like their “guarantees” to settle all your credit card debts for 30 to 60 percent of the amount you owe. Other companies may try to collect their fees from you before they settle any of your debts. The Federal Trade Commission’s Telemarketing Sales Rule prohibits companies that sell debt settlement and other debt relief services on the phone from charging a fee before they settle or reduce your debt. Some companies may not explain the risks associated with their programs, including that many (or most) of their clients drop out without settling their debts, that their clients’ credit reports may suffer, or that debt collectors may continue to call them.

Before you enroll in a debt settlement program, do your homework. You’re making a big decision that involves spending a lot of your money that could go toward paying down your debt. Enter the name of the company name with the word “complaints” into a search engine. Read what others have said about the companies you’re considering, including whether they are involved in a lawsuit with any state or federal regulators for engaging in deceptive or unfair practices.

Advance Fee Loans

Some companies guarantee you a loan if you pay them a fee in advance. The fee may range from $100 to several hundred dollars. Resist the temptation to follow up on these advance-fee loan guarantees. They may be illegal. It’s true that many legitimate creditors offer extensions of credit through telemarketing and require an application or appraisal fee in advance. But legitimate creditors never guarantee that you will get the loan – or even represent that a loan is likely. Under the FTC’s Telemarketing Sales Rule, a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for — or accept — payment until you get the loan.

Credit Repair

Be suspicious of claims from so-called credit repair clinics. Many companies appeal to people with poor credit histories, promising to clean up their credit reports for a fee. But anything these companies can do for you for a fee, you can do yourself — for free. You have the right to correct inaccurate information in your file, but no one — regardless of their claims — can remove accurate negative information from your credit report. Only time and a conscientious effort to repay your debts will improve your credit report. Federal, and some state, laws ban these companies from charging you a fee until the services are fully performed.

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