As we wind down 2022 you may be thinking about ways to get your money in order for the new year. If getting rid of debt is part of your plan you should be careful about how you go about doing it.
Debt consolidation company accused of tricking customers
One of the first steps to fixing your finances often starts with trying to get rid of debt. This time of year, you are probably getting more offers from credit card consolidation companies. The Federal Trade Commission just released a warning after one of these companies was sued for deceptive practices.
Acro Services claimed they could clear up your credit for a fee - plus monthly fees for credit monitoring services. Instead, the FTC says they operated a deceptive credit card debt relief scheme. You’d have to sign up for their program and pay an enrollment fee (usually in the thousands) - plus monthly fees for “credit monitoring” services.
Once enrolled, it was often hard to reach anyone. If you did, you might get a form letter to dispute your debts - even when the company knew those debts were legit. Even worse, says the FTC, these companies would tell you to stop making payments and stop communicating with your credit card companies. If you followed these instructions, you’d see increased fees, added interest, lower credit scores, and, sometimes, lawsuits from creditors.
Steps to take if you are looking for ways to pay off your credit cards more quickly
- Don’t pay upfront for the service. It’s illegal for a debt relief company to charge you a fee before they do anything to relieve your debt. These companies cannot collect a fee until they’ve successfully renegotiated, settled, reduced, or otherwise changed the terms of at least one of the consumer’s debts. You can read more specific requirements about these fees here.
- Call your credit card company and ask for a payment plan you’ll be able to afford. You can also ask for a lower interest rate, which may help lower your monthly payments and/or overall debt owed in the long run.
- Consider a reputable credit counselor. The FTC has ways to check companies that offer to help with debt.
As you look to get your money in order, the key is to really take a look at your debt and income.
In this week’s Ask Amy episode, CPA Alan Pruitt of Pruitt Prep CPA talks about budgeting, along with tax tips you should know for the end of the year.