Individuals in debt who wish to make use of the services of a debt management firm should do research before committing themselves. An unscrupulous debt management firm can harm a debtor’s interests in many ways, so make sure to keep the following 4 things in mind before employing a debt management firm:
1. Avoid any agency that calls you by phone or sends you spam: The majority of debt management firms promote in the yellow pages or on the Web, but don’t over-aggressively solicit customers. Therefore, there’s a good opportunity any company which does so isn’t on the level. Debt management companies that follow a cold calling policy or send unwanted emails will usually not be able to provide any solid references. Most of these businesses don’t even keep a reserve fund, which serves as a promise for the debtor that his creditors will be paid.
2. Non-profit agencies do not necessarily provide better service: First, not all non-profit debt management firms offer their services free; several firms charge up to 15% of the debt amount. Being a non-profit organization doesn’t make a debt management firm a better and more effective service provider than those that charge for the services. Actually, companies charging for their service are under an obligation to free their clients of debt as effectively as possible because they are making a profit from their work and their profitability is directly linked to their credibility and reputation in the market.
3. Never part with credit card info on the phone: A reputed and trustworthy debt management firm will never ask you to provide your credit card number or bank information on the phone. This is because they understand that callers may be impersonated; moreover, the increase in online frauds is reason enough for people in debt to be extra cautious when checking out debt management firms. Debt management companies that are acting in great faith will never ask a prospective client or an existing client to part with sensitive information of any kind over the phone.
4. Do not believe anyone who provides a deal that is too good to be true – it probably is: Frequently debtors come across debt management deals that promise to decrease their debt by half in short time. This rarely happens; however, the debtor does end up paying high fees and a considerable upfront amount to the debt management company. Such companies also dissuade debtors from communicating with their lenders; this is never a good idea and invariably results in a negative effect on the debtor’s credit rating. If a debt reduction company promises to provide more than some interest reduction and counseling on getting out of debt and staying debt free, the claim ought to ideally not be taken at face value.
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