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Credit card debt can be overwhelming, especially in today’s high-rate credit card environment. With the average credit card rate sitting at an all-time high — and retail credit card rates averaging over 30% — it doesn’t take much for what should be a manageable balance to balloon out of control. That’s why so many people seek out debt forgiveness programs, which are offered by debt relief companies and have the goal of working with your creditors to reduce your total debt.
The idea of settling your credit card debt for less than what you owe can feel like an attractive solution, and in some cases, it can be, but it also comes with risks. For example, it’s not unusual for scammers to prey on those in financial distress, promising quick fixes and unrealistic results. These scams not only fail to resolve your debt but can also add to your financial burden.
Given the risks, it’s important to be able to distinguish between trustworthy companies and those that will take advantage of your situation. That way, you can avoid falling victim to these types of scams.
Start working with a trustworthy debt relief company today.
7 credit card debt forgiveness red flags to watch for
These red flags could indicate a debt forgiveness company may not have your best interests at heart.
Upfront fees
One of the biggest red flags when dealing with a debt forgiveness company is if they ask for money upfront. According to the Federal Trade Commission (FTC), it is illegal for debt settlement companies to charge fees before they successfully reduce or settle your debt. Reputable companies only charge for their services after they have made progress on your behalf. Scammers, however, will often demand high upfront fees with the promise of future savings. So, if you encounter a debt relief company asking for payment before they’ve done any work on your case, it’s a major warning sign to pay attention to.
Take steps to get rid of your credit card debt now.
Guarantees of specific outcomes
Debt forgiveness is a complex process that depends heavily on the negotiations with your creditors. As a result, no company can guarantee a specific reduction in your debt or assure you that they can prevent legal actions from your creditors. Any company that promises a guaranteed reduction is likely misleading you. Legitimate debt settlement companies will explain the risks and uncertainties involved and they will never make absolute promises about the outcome.
Promises to eliminate debt quickly
Be wary of any company that claims they can resolve your credit card debt in just a few months. Scammers may try to lure you in by promising fast results, but in reality, legitimate debt settlements take time — between two and four years on average. A reputable company, on the other hand, will give you a realistic timeline and be transparent about the steps involved. So if the timeline seems too good to be true, it probably is.
Not disclosing the risks
A trustworthy debt forgiveness company will inform you of the risks associated with the process, such as potential damage to your credit score, the possibility of creditors refusing to negotiate and the chance of being sued for unpaid debt. Scammers, on the other hand, may gloss over these risks or fail to mention them altogether. If a company isn’t upfront about the potential downsides, they are likely more interested in taking your money than helping you solve your financial problems.
High-pressure sales tactics
Debt forgiveness scammers often use high-pressure sales tactics to push you into making a quick decision. They may rush you to sign up for their program or threaten that you’ll miss out on a “limited-time offer” if you don’t act immediately. These tactics are designed to make you feel desperate and prevent you from doing thorough research, so if you feel rushed or pressured, take a step back.
A lack of accreditation
Before working with any debt settlement company, check their accreditation and standing with professional organizations like the American Fair Credit Council (AFCC) or the International Association of Professional Debt Arbitrators (IAPDA). Companies that are not accredited or do not have positive reviews from these organizations may be trying to avoid accountability.
Vague or incomplete contract terms
Always read the fine print before signing any agreement with a debt forgiveness company. If the contract does not clearly outline the fees, the services provided and the timeframe for settling your debts, you should be cautious. Scammers often rely on vague or misleading contract language to obscure the actual terms of their services, but a legitimate company will provide a contract that spells out all the important aspects of the arrangement.
The bottom line
Credit card debt can be a heavy burden, but it’s important to choose the right path for relief. Unfortunately, scammers will often try to take advantage of people’s financial desperation, offering false promises and charging exorbitant fees for little to no results. By being aware of these red flags, you can protect yourself from falling into a scam and be better prepared to find reputable, accredited companies that are upfront about the risks and willing to guide you through the process responsibly.
