Navigating Debt Solutions: A Guide from the Better Business Bureau
Feeling overwhelmed by debt is a common struggle, and many turn to services promising relief. Tho, the Better Business Bureau (BBB) warns that options like credit repair, debt consolidation, and debt relief vary substantially, and some can be detrimental.BBB’s Financial Wellness HQ provides resources to help consumers understand these services,identify misleading claims,and protect thier finances.
According to Mechele Agbayani Mills,President & CEO of BBB Serving Central East Texas,”Understanding how each [debt solution] works is key to choosing the solution that best fits your situation.” Here’s a breakdown of common approaches:
Credit Counseling: This encompasses a range of support, including budgeting assistance, educational programs, and guidance from counselors. Often, credit counseling leads to a Debt Management plan, where an agency consolidates payments and distributes them to creditors.
Debt Relief (or Settlement): This involves negotiating wiht creditors to perhaps reduce the amount owed through lowered interest rates, waived fees, or balance reductions. While individuals can attempt this independently, companies offer this service for a fee.
Debt Consolidation: This combines multiple debts into a single loan or payment, potentially simplifying finances and lowering interest. However, it can involve higher fees and may require collateral, such as a home.
Credit Repair: These companies focus on correcting inaccuracies found on credit reports. It’s crucial to remember that legally, accurate negative facts cannot be removed from a credit report.
red Flags to Watch For:
The BBB advises consumers to be wary of these questionable practices:
* Upfront Fees: Demanding payment before providing any services.
* Guaranteed Results: Promises of debt elimination or immediate credit fixes.
* High-Pressure Sales: Unsolicited calls or emails offering “special deals” or using pressure tactics.
* Communication Restrictions: Suggestions to stop paying or communicating with creditors.
Consumer Protections:
The Credit Repair Organizations Act (CROA) provides certain protections for consumers in the U.S. when using credit repair services. These include a written contract outlining services, a cancellation period, and full disclosure of all fees.
Before committing to any program, the BBB recommends researching companies at bbb.org to ensure trustworthiness.
The BBB is a non-profit organization dedicated to promoting fair and honest business practices. Most of its services to consumers are free, including access to Business Profiles on over 5.3 million companies, charity reviews, dispute resolution, and educational resources. More information is available at bbb.org. BBB Serving Central East Texas, established in 1985, currently serves 19 counties.
