State AG warns of debt assistance scams

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WORTHINGTON — The Office of Minnesota Attorney General Lori Swanson recently released information designed to make the public aware of debt assistance scams used by those willing to take advantage of people in financial crisis.

For those struggling to make ends meet, credit counseling and debt management plans can look like an easy solution, but some companies charge money to help and end up making the situation worse.

Reputable credit counseling organizations help a client develop a monthly budget and give advice on money management and paying off debt. Many are nonprofit, with counselors trained in finance and consumer credit.

To find a reputable credit counseling organization, contact LSS Financial Counseling Service at (888) 577-2227 or www.cccs.org, or the National Foundation for Credit Counseling at (800) 388-2227 or www.nfcc.org.

A debt management plan can help those who owe more than they can afford to pay. Clients can deposit money each month with a credit counseling organization, which may work with the client’s creditors to lower interest rates and waive certain fees. Most debt managements companies are required to be licensed with the state, so people seeking help should contact the Minnesota State Commerce Department at (800) 657-3602 or www.commerce.state.-mn.us to check out a company before hiring.

According to Swanson’s office, a debt settlement/negotiation company will promise quick results, but can do more harm than good. They typically tell a client to stop paying bills altogether and save the funds, then promise to negotiate a lump-sum payoff of the debt. But these types of companies are not regulated or licensed under Minnesota law, and stopping payment of bills will cause credit to suffer.

The programs are risky and have a long-term negative impact on credit and a client’s ability to get a loan or credit in the future. It can lead to lawsuits against the client and/or wage garnishment.

Swanson’s office provides the following tips for consumers:

l Find a reputable counselor by using the phone numbers listed earlier or checking with the Better Business Bureau at 1-800-646-6222 or www.bbb.org. Try to find an organization that will help for free.

l Check to make sure the company being hired for debt management is licensed by the Minnesota Department of Commerce.

l Beware of any companies that recommend nonpayment of bills.

l Beware of anything that seems to be too good to be true.

l Do not let a money-back guarantee lure you into a false sense of security. Many of the so-called guarantees are not worth the paper they are printed on.

l Know and understand the fees before enrolling in credit counseling or debt managements. Some services are nonprofit, some are not. Take time to know what the total costs will be and who is receiving your money.

l Watch the fine print, and make sure that any contract you are asked to sign makes the same claims and promises are what you were told over the phone. Make sure all verbal promises are in writing.

l Make sure the plan is tailored to your needs. A legitimate credit counseling organization should take time to understand your income and expenses, not offer generic one-size-fits-all advice.

l Remember, there are no quick fixes or magic solutions for getting out from under consumer debt. Doing so takes hard work, time and careful budgeting.

For more information, contact the Minnesota Attorney General’s Office at (800) 657-3787 or www.ag.state.mn.us.

Tags: debt management, attorney general, news, minnesota, scams