Debt Settlement Bait and Switch Tactics

Debt settlement bait and switch tactics are under scrutiny because financially strapped consumers may fall for schemes that don’t really help their financial status.

What Is a Debt Settlement Bait and Switch Scheme?

A company may offer you a consolidation loan, but there is no loan. Instead, the company is placing you in a debt settlement program. They bait with the monetary savings; the switch is often just a new lender.

How Does This Scam Work?

According to an insider who worked in the debt settlement industry for several years, the consumer will receive an offer for a loan from a lender. When the consumer contacts the lender, the sales representative gathers pertinent data, including name, address, Social Security number, and date of birth.

The consumer is then placed on hold while the sales representative says the consumer’s credit is being run to see if the consumer will qualify for a loan. This credit check may be in violation of the Fair Credit Reporting Act  (FCRA).

The insider said that many times the ‘lender’ does not even possess a lending license.

Almost everyone is “approved” because no loan exists. The customer is placed into a debt settlement program that can include fees.

Like most sales-oriented jobs, the world of selling debt consolidation services is a high-pressure environment with heavy turnover of sales representatives who are forced to make a weekly or monthly sales quota.

Collectors on these debts, however, face different rules. There are many a class action lawsuit against unsolicited and unauthorized debt collection calls.

Is a Debt Settlement Company Allowed to Charge Fees Up Front?

The Federal Trade Commission (FTC) changed the rules on debt collection fees in 2010. For-profit companies are no longer allowed to charge a fee before a consumer’s debt is settled or reduced.

Are Student Loan Debt Relief Programs Really Just Scams?

Student loan debt relief, unless through the government, can often be a scam.  The FTC has filed a complaint against Mission Hills Federal and Federal Direct Group, allegedly led by named operator Labiba Velazquez. The student loan debt relief scam allegedly convinced consumers that if they paid the companies hundreds or even thousands of dollars, that their monthly student loan payments would be lowered. The scam allegedly took more than $23 million from thousands of debt-laden consumers who were looking for relief from student loan payments.

Are All Types of Debt Consolidation Bad for My Financial Health?

Not all debt consolidation programs are scams, but debt consolidation scams can leave you deeper in debt, add to the time it will take to pay off your debts, and cause you to pay more because of interest rates and fees. Most debt settlement bait and switch arrangements really mean just moving debt from one place to another, which simply allows different companies to earn money from the interest and fees you pay.

What if I Receive an Offer to Settle a Debt That Has Already Been Dismissed in a Bankruptcy?

Debt collectors are not allowed to collect debts that have been dismissed in bankruptcy court.

What Is the Statute of Limitations on Collecting Old Debts?

Any debt that has been in default for more than four years may no longer be enforceable, at least not through a civil lawsuit. Still, some ill-reputed debt collectors may illegally attempt to collect on these old debts by hoping you are unaware of the law.

Join a Free Debt Consolidation Class Action Lawsuit Investigation

You may qualify for this investigation if a debt repair company did one of the following:

• Sent unwanted cell phone calls, text messages, robocalls, and or prerecorded messages;
• Sent a loan offer or offered credit, rejected your application, and then pitched their debt program;
• Required payment for credit repair services up front and you were not provided with a full disclosure in writing; and/or
• Promised to help but left you in either the same or worse financial condition.

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This article is not legal advice. It is presented
for informational purposes only.