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 others 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 debtors 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:
• Companies that guarantee 100 percent satisfaction;
• Companies that spend little or no time reviewing a potential customers financial situation; and
• Companies promising to perform credit repair.
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:
• Review the Office of the Consumer Credit Commissioners list of licensed credit counselors.
• Inquire about the companys services - some will perform in-depth evaluation of each customers monthly expenditures while others only offer debt management programs.
• Request information about the cost of up-front and monthly fees that the service will charge for its services.
• Ask for the estimated monthly payment amount-including how much of that payment will actually be applied to preexisting debt (as opposed to new fees).
• Request that the service provide accounting statements which ensure that debtors can track their remaining debts and outstanding balances.
• Determine how long the repayment term will last so that an estimated debt-free day is clear.
• Check for complaints at the Office of the Attorney General and the Better Business Bureau. Consumers can check for complaints at the BBBs Web site at www.bbb.org.
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.
Credit Bureaus:
Equifax fraud department: (888) 766-0008
Web: www.equifax.com
Experian fraud department: (888) EXPERIAN (888-397-3742)
Web: www.experian.com/fraud
Trans Union fraud department (800) 680-7289
Web: www.transunion.com
Other Resources:
National Foundation for Credit Counseling
(800) 388-2227
www.nfcc.org
Federal Trade Commission
(877) FTC-HELP
www.ftc.gov
Better Business Bureau
www.bbb.org
Note: This Consumer Alert was issued by the Office of the Attorney General as part of National Consumer Protection Week.
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 others 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 debtors 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:
• Companies that guarantee 100 percent satisfaction;
• Companies that spend little or no time reviewing a potential customers financial situation; and
• Companies promising to perform credit repair.
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:
• Review the Office of the Consumer Credit Commissioners list of licensed credit counselors.
• Inquire about the companys services - some will perform in-depth evaluation of each customers monthly expenditures while others only offer debt management programs.
• Request information about the cost of up-front and monthly fees that the service will charge for its services.
• Ask for the estimated monthly payment amount-including how much of that payment will actually be applied to preexisting debt (as opposed to new fees).
• Request that the service provide accounting statements which ensure that debtors can track their remaining debts and outstanding balances.
• Determine how long the repayment term will last so that an estimated debt-free day is clear.
• Check for complaints at the Office of the Attorney General and the Better Business Bureau. Consumers can check for complaints at the BBBs Web site at www.bbb.org.
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.
Credit Bureaus:
Equifax fraud department: (888) 766-0008
Web: www.equifax.com
Experian fraud department: (888) EXPERIAN (888-397-3742)
Web: www.experian.com/fraud
Trans Union fraud department (800) 680-7289
Web: www.transunion.com
Other Resources:
National Foundation for Credit Counseling
(800) 388-2227
www.nfcc.org
Federal Trade Commission
(877) FTC-HELP
www.ftc.gov
Better Business Bureau
www.bbb.org
Note: This Consumer Alert was issued by the Office of the Attorney General as part of National Consumer Protection Week.
