Be Cautious When Signing Up For Financial Services

When your financial situation becomes unmanageable, turning to a business that offers help in solving debt or credit problems may seem like a reasonable solution. But you need to proceed with caution!

Many debt and credit agencies offering too-good-to-be-true solutions to your financial problems, are just that - too good to be true. Some businesses that offer debt resolution or credit repair plans may charge high fees and fail to follow through on the services they sell. Others may misrepresent the terms of their service, failing either to explain certain costs or to disclose the complete terms of the agreement.

The following questions will help you to carefully review a company, the services they offer, and the terms of the agreement you're entering in to. Be sure to consider several companies before choosing to do business with any organization.

When Considering Any Financial Service

Things to Consider:

• Check out any company with your state Attorney General, local consumer protection office and the Better Business Bureau in the company's location. They may be able to tell you whether other consumers have registered complaints about the business.
  
• Any reputable company should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If not, consider that a red flag and go elsewhere for help.
  
• Don't rely on oral promises. Always get everything in writing.
  
• Educate yourself fully and use good sense when entering any financial arrangement.

Questions to Ask:

• What services does the company offer, and how will they help your situation?
  
• What are the costs and fees of the company's service? What is the basis for their fees? Will you be charged anything before the company can/will help me?
  
• Will there be a formal written agreement or contract?
  
• Will you be working with agent or several? Are the company's agents accredited or certified? If not, how are they trained?
  
• Who regulates, oversees and/or licenses this company? Is their company audited?
  
• Where does the company receive their funding? Are they a non-profit, or for-profit organization?
  
• Does the company offer educational materials? If so, will they send them to you, or can you access them on the Internet? Is there a cost for these materials?
  
• After helping you solve your immediate problem, will the company help you develop a plan for avoiding problems in the future?
  
• What is the company's privacy policy? Can/will they assure you that information about you (including your address and phone number) will be kept confidential?
  

When Choosing a Debt Management or Debt Counseling Agency

Questions to Ask:

• How much debt must you have to qualify for their services?
  
• How is your monthly payment determined? What if this is more than you can afford?
  
• How does the company's debt repayment plan work?
  
• Will the company be able to negotiate with your creditors to eliminate/lower interest and finance charges or waive late fees?
  
• Which of your debts will qualify for inclusion in the debt repayment plan? Will the company help you plan for payment of debts not included in the plan?
  
• What happens if you can't maintain the payments and other conditions of the debt repayment plan?
  
• How will you know your creditors have received payments? Is client money put in a separate account from operating funds?
  
• Are you able to access status reports on my account? Are they available online or by phone? How often can you access them?
  
• Who will help you if you have problems with your accounts or creditors?
  
• How secure is the information you provide to the company?

When Choosing a Debt Consolidation Agency

Questions to Ask:

• Did the seller, ad or telemarketer guarantee your ability to receive a loan or line of credit? Do they require advanced payment? Be suspicious. Legitimate lenders will not "guarantee" that you will get a loan or a credit card before you apply, especially if you have bad credit, or a bankruptcy.
  
• Did a telemarketer selling this service request a credit card account number, bank account information, or your Social Security number from you over the telephone? This is a red flag! Never give out this information unless you are familiar with the company and know why the information is necessary.
  
• Did you find advertisements for this service or company in the classified ad section of a newspaper or magazine, or in mailings, radio spots, or on local cable stations? Beware of these companies - they often represent scams, or require you to call expensive "900" numbers to learn about their service.
  
• Does the company use delivery systems other than the U.S. Postal Services, such as overnight or courier services? This may be an attempt to avoid detection and prosecution by postal authorities.
  
• Is there an advanced-fee or application fee required, but no supposed "guarantee" of receiving a loan or line of credit? It is an accepted and common practice for reputable lenders to require payment for a credit report or appraisal. You also may have to pay a processing or application fee.
  
• Does the offer of credit require your verbal or written acceptance of the loan or credit offer? Is the application subject to a check of your credit report to make sure you meet their credit standards? Is the application fee minimal? These are generally good signs of a legitimate loan or extension of credit.

When Choosing a Credit Repair Agency

Questions to Ask:

• What services does this company offer? Is it worthwhile to you to pay someone else to do something you can do for yourself for free? Credit repair companies cannot legally do anything to improve your credit that you cannot do for yourself.
  
• Does the company promise to remove bad credit information from your report? Remember that no one can legally remove legitimate bad credit information from your credit history. The only information that can be changed, amended, or corrected is incorrect or outdated information.
  
• Does the company freely disclose their fee-schedule and cost of service, including monthly fees, per-service fees, and other costs? Is an advance-fee required before they will take your case?
  
• Does the company offer an unrealistically quick solution to your credit problem? Only time and a conscientious effort to repay your debts will improve your credit report.
  
• Does the company clearly explain your legal rights and what you can do for yourself for free?
  
• Does the company prevent you from, or recommend that you not contact a credit bureau on your own?
  
• Does the company suggest that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security number? This is not a legal solution - it is a federal crime to obtain an Employer Identification Number from the IRS under false pretenses.
  
• Does the company advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity? Be very cautious! If you follow illegal advice and commit fraud, you may be subject to prosecution.
  
• Does the contract include specific information about: 1) the payment for services, including their total cost; 2) a detailed description of the services to be performed; 3) how long it will take to achieve the results; 4) any guarantees they offer; and 5) the company's name and business address? The Credit Repair Organizations Act requires that this specific information is included in your contract. Read carefully to be sure you understand the terms of your agreement and ensure the contract includes clear explanations of all required information.

For more useful information regarding potential scams and how to protect yourself against them, visit the Federal Trade Commission's site at www.ftc.gov.