Attorney General Abbott Urges Texans To Get All The Facts Before Entering Into Credit Counseling, Debt Servicing Agreements
It can happen quickly and catch even the most financially savvy Texans by surprise. Unexpected expenses and, perhaps, a break in employment or a decrease in income can lead to late payments as debt piles up. In the process, credit ratings start to suffer and debt becomes more expensive. The cycle can be vicious.|
Texans hoping to reduce their credit card debt may encounter advertisements from credit counseling, debt management, or debt settlement companies. While reputable companies offer these services, unfortunately there are also some unscrupulous operators who make false promises in an attempt to profit from othersí hard times.
Credit counseling is a service that is designed to teach credit card holders how to use credit responsibly and get out of serious debt. Some credit counselors also offer debt management plans and may refer clients to companies that offer debt management services.
Generally, legitimate debt management plans allow a debtor to consolidate their bills into a single monthly payment each month. The debtorsí monthly payment is made to the credit counselor, which redistributes it to creditors--often at reduced interest rates. If executed properly and operated by a legitimate enterprise, this process can help Texans reduce their debt load.
Debt settlement companies advertise that they will assist consumers in resolving unsecured debt for less than the amount owed. Debt settlement companies attempt to reach an agreement with the consumers' creditors for a lump sum payment in settlement of the consumers' debts. Debt settlement companies require that the consumers stop paying on their creditors, which can lead to aggressive collection efforts, legal action, and negative reports to credit bureaus.
Some fraudulent companies fail to provide any real services. These types of programs only increase financial instability and draws customers deeper into debt. Texans hoping to avoid fraudulent debt management services should avoid the following:
As with most financial decisions, Texans should research prospective credit-counseling, debt-management, and debt settlement companies before entering into any contracts, divulging any personal information, or paying for any services. Some of these are non-profits, while others are for-profit, so their business models and fees may differ. Before hiring company, Texans should:
For additional information visit the OAG Web site at www.texasattorneygeneral.gov. The Federal Trade Commission also offers a brochure on choosing a credit counselor.
Consumers who believe they have been victimized by a credit-counseling, debt-management, or debt settlement company can file a complaint with the OAG at (800) 252-8011 or online at www.texasattorneygeneral.gov.
Because only false, inaccurate, or out-of-date information can be removed from credit reports, Texans can contact credit reporting agencies on their own and do not need to pay a service to do that work for them. Each of the major credit bureaus' contact information is available below.
Equifax fraud department: (888) 766-0008
Experian fraud department: (888) EXPERIAN (888-397-3742)
Trans Union fraud department (800) 680-7289
National Foundation for Credit Counseling
Federal Trade Commission
Better Business Bureau
Note: This Consumer Alert was issued by the Office of the Attorney General as part of National Consumer Protection Week.
ABOUT CONSUMER ALERTS - The Office of the Attorney General accepts consumer complaints about businesses. When a pattern of complaints warrants intervention, the Attorney General can file a civil lawsuit under consumer protection statutes, sometimes with the result that a company is required to pay restitution to consumers -- see our Major Lawsuits page. However, when a consumer is swindled by a con artist, filing a complaint cannot help. Civil litigation can sometimes put a very unscrupulous business out of action, but often cannot produce restitution.
Individual con artists generally fall under the jurisdiction of a criminal prosecutor -- in Texas, this is the district or county attorney. But even when they are charged and convicted, these individuals usually have spent the money as fast as they have stolen it. A person who is the victim of fraud should report the incident to the police or sheriff. But by far the best thing is for consumers to be aware of fraud, so they are not swindled in the first place. For this reason, the Office of the Attorney General posts these Consumer Alerts about possible scams and schemes that come to our attention through citizen contacts to our office or other sources.