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Beware: Debt Repair Shops
June 7th, 2016
Buyer Beware. That advice has existed since the Middle Ages, a time when snake oil salesmen would travel from village to village with their carts, selling the virtues of the “miracle cure for numerous ailments, from scurvy to blindness”. The more charming they were, the easier it was to exaggerate the benefits and sell a product that in the end, could not deliver the goods. But the consumer found this out well after the snake oil salesman had left town and moved on to find the next victim. In 2016, snake oil salesmen have been replaced by a dangerous crop of scams and charmers. One of the most prolific: online debt repair shops. What is this scam and what’s at stake?
Economic news is riddled with articles describing high unemployment rates, rising costs for food, lodging and transportation as well as businesses and consumers wrestling with too much debt. As a result, Canadians are more cash-strapped than ever, borrowing to make ends meet. Trying to maintain a reasonable standard of living is possible for most but sometimes there are bumps in the road. Hundreds of thousands need help every year.
It is during periods of high debt stress that one is most vulnerable. The knee jerk reaction is to look for a quick fix to get through tough times and turn the corner. We are not always thinking clearly and jump on the first solution we find. Many will search for a solution on the web. It can be done anonymously, at any time of day and at no cost. At least not initially…..
Most debt repair shops are virtual. They don’t need a storefront and can sell anywhere around the world with a powerful website and ad campaign. Most operate on the principal that the stressed out consumer who is carrying too much debt is looking for a convenient way to make the problem go away…..or appear to go away in the short term. The most popular model: a promise of improving your credit score. How? A disguised loan to pay off your debt over a longer period of time. The catch? They can charge enormous fees and a higher interest rate than you are currently paying, often 30% of more. If you only consider the monthly payment, it looks like a deal but in the end it could cost $1,000’s more and damage your credit rating if you default. More debt is not the solution for someone suffering from debt stress.
Also beware the “sign now, read later” shops. The fine print isn’t what the salesperson is pitching over the phone. They know creditors are calling to collect past due accounts and use this as leverage to rush the decision. The fine print in the agreements is in fine print for a reason. Once you sign up and start making monthly payments by automatic debit from your account, calls from your creditors saying they haven’t been paid alerts you to the fact that the shop has done nothing. They likely won’t until their up-front fee, often several $1,000, has been paid in full. Once you discover this, you stop making payments but the shop’s web address is no longer active and you are left in a worse financial situation.
Licensed Insolvency Trustees (LIT) are the only agents in Canada able to offer protection from creditors through consumer proposals and bankruptcies. LIT’s are regulated by the federal government and must follow strict licensing, training and legal requirements to practice. LIT’s will explain various options to address financial crises: debt consolidation, refinancing, selling assets, family loans, as well as formal options such as proposals and bankruptcy. They have the knowledge and expertise and can offer protection for the consumer that unregulated and rogue “debt repair shops” cannot.
Do not line the pockets of debt repair shop owners whose sole objective is to take your money. Your financial well-being is at stake and you should get help from a reputable source.
If you need help with your plan or are burdened with debt stress, asking for sound advice is a sign of strength and the smart thing to do. Asking sooner rather than later is always better. Call Doyle Salewski today for your free, no obligation consultation. You’ll be glad you did.