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Rip-Off Alert: Bogus settlement companies offer debt assistance

Reported by: Marie Mortera
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Updated: 8/29/2013 11:47 pm
LAS VEGAS (KSNV & MyNews3) -- Business has been booming for debt settlement companies throughout the nation’s financial recovery.

But, in this Rip-Off Alert, News 3 learned to choose carefully when looking for help to paying off debts.

“They were telling customers “hey you have all of this debt; we can settle it for approximately 45 percent of the debt,” said U.S. Postal Inspector Robert Clark.

Thousands of people carrying credit card debt jumped at this offer.

“Customers who have all this debt are like ‘you mean I have $50,000 in debt and I won’t have to pay back $22,500?’ Yeah that’s what you do,” Clark said.

Authorities say the debt settlement firm in this case asked its clients to sign a contract and trust the company to manage their debt.

Their pitch involves stop talking with creditors and make just one monthly payment to them.

“Stop talking to your creditors. Make one monthly payment to us and “as long as you can afford to make one monthly payment to us, sign a three-year contract or a four-year contract whatever works for you.”

The problem from 12,000 customers, the company allegedly collected $2.2 million in fees and didn’t pay off any of their debt.

In fact, “if” a customer asked questions about fees – the operator was prepared.

“Salespeople were instructed initially to say ‘our fees are included in the program,’ and that’s it. if the consumer pressed they would say ‘well, our fees are $49 a month,’” Clark said.

The company’s owner was not concerned.

“His motto was “just get them signed up” we’ll deal with all of the complaints afterwards, just sign them up,” Clark said.

Postal inspectors say there are ways to determine whether a debt settlement firm is legit.

“If they disclose all of the fees up front and they aren’t trying to rush you through the contract it may be a more legitimate business.”

There’s a new law in place that requires debt settlement firms to meet with in person to sign a contract.

“So if you have a company that emails you a contract that is another red flag,” Clark said.

Keep this in mind -- consumers can negotiate payment terms with credit card companies on their own.

“Contact the credit card company that should be the first step and say hey look this is my situation can you work with me? A lot of times they will agree to do different things for you to help you because in the end they want to be paid,” Clark said.

Postal inspectors say it’s easy to target people with high credit card debt or anyone having financial problems because they are often desperate for an answer.

In most cases, debt settlement firms buy a so-called lead list, which has phone numbers of consumers carrying excessive debt.

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