Money Traps and Scams

Consumer Alert Issued – Beware of Debt Reduction Companies

In keeping with the alert on debt reduction companies issued by the Financial Consumer Agency of Canada (FCAC) on Tuesday, we thought we’d follow suit and perhaps shed a bit more light on the situation. We all know the cautionary saying “If it sounds too good to be true,” but it seems that many consumers don’t realize that this extends into the debt resolution world as well.

The number of companies marketing themselves as debt consultants and credit counselors alike has been increasing over the past few years (in this economy is it any wonder?), these firms bringing with them a slew of promises to get YOU out of debt. For some, what they offer may prove a sound plan to attack those mounting bills, but for most they’re simply not doing anything for you that you couldn’t do yourself.

Furthermore, most Debt Consultants are unregulated, unsupervised and offer NO guarantees. In other words, as you congratulate yourself on managing that burdensome debt load and you make the agreed-upon monthly payments to Mr. and Mrs. Debt Consultant, you will probably find that their fees are the first bill to be paid, and interest is still accumulating on your initial debts – not to mention the collection action that will continue or even escalate.

Other claims that these types may make along the lines of “government approved” are also not worthwhile; debt settlement programs are government-approved as much as the fabulous shoes you’re wearing. The enforcement of minimal industry regulations does not equal government approval of how or what a business is selling!

Remember, friends – use caution and your common sense when evaluating a company’s claims, particularly where your finances are concerned. One simple and handy thing to always remember is that it should never cost money to talk about your debt! Often debt consultants will charge a fee to essentially refer you to a Trustee in Bankruptcy or Consumer Proposal Administrator, who will then provide you with a free consultation. Why free, you ask? Because Trustees/Administrators are the only people licensed to administer bankruptcies or consumer proposals! They are regulated and overseen by Industry Canada, and the federal act that binds them guarantees protection for individuals and creditors alike.  Trustees are bound by a rigid code of ethics that requires them to honestly and impartially assess your situation and provide you counsel that is in YOUR best interest.  We know, it almost sounds too good to be true!

Click here to access the FCAC Consumer Alert issued January 10, 2012.

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