How to avoid scams when paying off debt
MINNEAPOLIS — More Minnesotans are seeking credit counseling amid soaring debt. There are legitimate debt relief or settlement companies that can help, but some can be scams.
This week, Minnesota Attorney General Keith Ellison shut down two debt settlement companies that illegally collected fees from customers and misrepresented their services.
His office also got the companies — Financial Solutions Group and Accelerated Debt Settlement — to provide full refunds to its Minnesota clients totaling over $1 million.
"They were telling me they were going to be making the payments and that it was normal that the credit cards will call me. That they will have everything under control, but it was not true," said Jimena Mazier of Prior Lake.
Mazier turned to a different debt settlement company two years ago after experiencing unexpected expenses to help her family in Honduras.
"My mother has a farm over there. Someone put it on fire, so I started helping my mother and getting out money from the credit cards to help her and send it over there," said Mazier.
Instead of paying, settling, or getting rid of her debts -- they just took her money.
"They're really interested in one thing and that's making the sale," said Thomas Nitzche of Money Management International, the largest nonprofit credit counseling organization in the nation.
"Bad things happen because the consumer doesn't understand what's happening so then they are surprised when the creditors go unpaid, and their credit ends up damaged when what they thought they were doing was a debt management program offered by a non-profit like ours," he said.
Nitzche says the are several warning signs of a debt settlement scam.
The first sign is substantial upfront fees. Also, beware of any company promising specific results, or one that does not provide clear information on how they plan to help you or what their services entail.
"You have to take the time to become an expert of your own situation and not just be convinced by ads that often sound too good to be true, because they are," explained Nitzche.
Mazier was lucky. She fought for two months to get her money — about $3,000 — back.
"That doesn't happen for everyone. I was calling them like every single day," said Mazier.
Now she's working with MMI, and she knows exactly where her money is going.
"I'm planning to pay my debt in like two more years," she said.
The attorney general encourages anyone who has been the victim of fraud by a debt settlement company to file a complaint with his office.