Read the fine print: Debt Verification Notice ends up with law firm, debt resolution

By Robb Hicken/ BBBs chief storyteller

“Your Renegotiated Credit Card Balance” caused Boise resident Jean to do a double-take.

“I don’t have any debt at all,” she says. “I couldn’t figure how they got my information.”

When you look at the Debt Verification Notice, it clearly states that she has a credit card balance of $23,400, and tells her to call  1888-687-0157 no later than 1/20/2013 to verify her credit card balance. It promises that she is estimated to have as much as $39,000 in outstanding balances, and the underwriting department may be renegotiate the amount down and set aside a payment plan of $552 a month.

When you call the number, it is answered by Mike from the processing department.

When I identified myself as being with the BBB, I was transferred to a voice message box.

At the bottom of the letter in fine print, it states that “This mailer is an advertisement that provides consumer leads to debt resolution providers and law firms.”

If you are knee-deep in debt and unable to pay your bills, credit counseling can be a financial lifesaver. A credit counseling agency may arrange a debt repayment plan, a creditor-approved arrangement that allows you to repay your unsecured debts at reduced interest rates. In these plans, you deposit money each month with the counseling agency. Your deposits are used to pay your creditors according to a payment schedule the counselor develops with you. Some credit counseling agencies charge little or nothing for managing the plan; others charge a significant fee over time. Ask up front what the cost will be.

As part of the repayment plan, you may have to agree not to apply for, or use, any more credit while you are participating in the program. A successful plan requires you to make regular, timely payments, and could take 48 months or longer to complete.

A debt repayment plan does not erase your credit history. Under the Fair Credit Reporting Act, accurate information about your accounts can stay on your credit report for up to seven years. In fact, creditors may report an account in financial counseling as payments missed, or that there are write-offs. But, a demonstrated pattern of timely payments should help you qualify for credit in the future.

If you want to work with a credit counseling agency, interview several. Check them out with your Better Business Bureau, state Attorney General, and local consumer protection agency. Any reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to give any details about your situation. If not, consider that a red flag and go elsewhere for help.

Before you select a credit counseling agency ask for information on the following:

  • Are the agency services confidential?
  • Will they devise a plan tailored to fit your needs?
  • Are the counselors certified?
  • Are budget and credit education opportunities offered?
  • Will your funds be protected? How?
  • Is the agency accredited?
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