Avoiding Debt Relief Scams During the COVID-19 Pandemic

The COVID-19 pandemic has financially affected Americans of all ages, across many walks of life, in varying degrees. As the U.S. works through various protocols and regulations related to health and safety, people’s pockets feel the effect — from workers who’ve been furloughed/laid off to business owners, landlords and more.

A recent survey found 41 percent of Americans anticipate the coronavirus severely impacting their financial well-being in the next half year; 39 percent believe they’ll feel a moderate effect. Furthermore, more than half of respondents (56 percent) are worried about being able to afford food for their families. Nearly half (45 percent) are struggling to stay on top of their rent or mortgage payments.

So, many Americans are in a more vulnerable financial state than they were before COVID-19 struck. Unfortunately, not only does this mean many people will be stressing over their bills but also that opportunistic scammers will be on the hunt for new victims in dire financial straits.

Here’s some advice on avoiding these debt relief scams during the COVID-19 pandemic and beyond.

Beware of Debt Relief Guarantees

Debt relief scams boil down to someone promising something that isn’t theirs to promise: They’ll get rid of your debt for “pennies on the dollar.” They target borrowers who are desperate for a way to get out from under their debt, swooping in with reassurances they can take care of the hard part — all you need to do is hand over your hard-earned cash.

As NerdWallet outlines, one type of student debt relief scam involves a company promising something “too good to be true” — forgiveness on your outstanding educational loans. Then they disappear with your cash. As one financial expert points out, the coronavirus relief bill did not include forgiveness, so organizations promising to deliver these results are lying.

In fact, it pays to be wary of any firm offering guaranteed results of any sort. Reputable debt relief programs will convey that there’s no guarantee lenders will accept any certain terms — just that they’ll do everything in their power to try to negotiate a lesser settlement on your behalf. Anyone confident enough to promise 100-percent-guaranteed results is bluffing.

Avoid Making Payments Up Front

Coronavirus pandemic or not, it’s illegal for debt relief firms to collect money up front before resolving debts in some manner under regulations put forth by the Federal Trade Commission. Perhaps the most noticeable red flag is a company asking you to pay fees before any of your accounts have been settled. Only after an agreement has been reached should you be on the hook for fees to the company for its services.

Conduct Your Own Research Up Front

The beauty of the internet is that you don’t have to rely only on what debt settlement firms tell you about themselves. Ask for information up front. As AARP writes, scam companies may ask you to provide your financial information before they provide theirs; treat this as a warning sign. Reputable debt relief services will be more than happy to provide information about their services free of charge and no obligation to you to give them your personal/financial info.

Check out online reviews from other consumers who have used the service, as well as what the American Fair Credit Council — a well-known trade association — has to say about the program. Members of this organization tend to be on the up and up because they must adhere to certain guidelines to remain in good standing.

If it’s hard to find information on a company, or there’s a lack of reviews available, be wary.

The COVID-19 pandemic has put many Americans in a tough spot financially. The last thing people need now is to lose even more money to a debt relief scam.

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