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Overcharging for Debt Negotiation and Credit Counseling

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Many people facing debt challenges fall victim to debt negotiation or credit counseling agencies that end up making their debt situation worse. Most of these companies habitually violate the law and you may be able to make them pay you if you suffered damages.

At Shrader Law, PLLC, our attorneys understand the tricks used by debt negotiation and credit counseling firms and agencies. Most people fall prey to debt negotiation and credit counseling agencies due to their convincing commercials on local media and dailies. The commercials portray the companies as a solution to a debt crisis.

What Debt Negotiation Firms Claim

Debt negotiation firms claim that you can negotiate to have your unsecured debt paid between 10% and 50% of the total outstanding balance. They also claim that their services are a convenient alternative to filing for bankruptcy. In most cases, they will advise you to stop making direct payments to your creditors and instead start making payments to them.

Debt negotiation firms will assure you that using their services will not have an adverse effect on your ability to obtain credit in the future. They could also mislead you to believe that once you complete the debt negotiation program, all negative information will be removed from your credit report.

What You Need To Know

To avoid falling prey to debt negotiation and credit counseling firms, you need to understand some truths about them:

  • Most companies will charge you a substantial amount of money for their services. You will have to pay an initial fee for establishing an account as well as other charges including monthly service fees and a final fee, which is a percentage of the money you have saved as a result of the negotiation. Pursuant to Florida law, companies cannot charge over certain rates, but most illegally overcharge consumers.
  • There is no guarantee that your creditor will accept the loan repayment terms proposed by the companies. Therefore, if you stop sending money to the creditors, you will incur late fees and interests on your debts.
  • In certain instances, creditors may have a right to sue you to recover the money you owe them. This is likely to happen if you make payments to debt negotiators instead of creditors.
  • If the debt negotiation agencies succeed in negotiating the loan terms on your behalf, the Internal Revenue Service may include the forgiven debt into your taxable income. Therefore, you will not benefit much from the debt relief after paying the negotiation fees and the additional tax.

Warning Signs of a Scam

If you ever decide to work with a debt negotiation company, you should first consult with your attorney. Our Tampa consumer protection attorneys at Shrader Law, PLLC, can instantly identify a fraudulent debt negotiator. Some of the warning signs that could help you identify a scam are:

  • A debt negotiation company that promises to remove your unsecured debt or promises to lower your debt than the outstanding amount
  • A debt negotiation firm that encourages you to use its services instead of filing for bankruptcy
  • A debt negotiator that requires some upfront fees before offering services
  • A debt negotiation company that encourages you to stop communicating with creditors
  • A company that claims to work in conjunction with credit reporting bureaus
  • An agency or company that does not require you to sign a written contract
  • Companies that do not have cancellation or refund policies

Speak to an Experienced Consumer Protection Attorney

The majority of Florida debt negotiation companies are not genuine but out to make profits by taking advantage of unsuspecting debtors. A consumer protection attorney will help you determine if debt negotiation is the way to go. If you are considering debt negotiation or if you have fallen victim to a debt negotiation company, contact an experienced consumer protection attorney at Shrader Law, PLLC as soon as possible.

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