Upfront Fees a Hallmark of Debt Relief Scams
Debt relief firm took $67 million in fees from over 20,000 struggling consumers.
Finding the right debt solution isn’t always easy, but it’s even more complicated when you factor in the odds that you may find a debt relief provider who isn’t operating entirely above board. That’s exactly the situation that at least 21,000 consumers faced as a result of working with a debt relief law firm that the CFPB has shut down at least temporarily.
The Consumer Financial Protect Bureau (CFPB) alleges the World Law Group took $67 million in upfront fees from consumers seeking debt relief. The company promised struggling consumers in need of debt relief would receive help from local lawyers.
However, the program advertised by the firm functions like debt settlement programs that have been heavily litigated in the past. Consumers were advised to stop paying the monthly bills on their debts and instead funnel money into an account that would later be used to make a settlement offer.
That practice itself is not illegal, but there are regulations in place that prohibit fees from being collected prior to a settlement being reached with at least one creditor. Essentially, a debt settlement program can be legally offered, but federal law requires the company to successfully negotiate at least one settlement on behalf of the client before any fees can be charged.
By contrast, World Law Firm charged initial fees of $199 and monthly service fees for attorney costs of $84.95. More troubling, the CFPB indicates consumers rarely spoke to attorneys – if at all.
“If you find a company that requires a large upfront fee, it may be best to avoid that organization and research other services to ensure you aren’t being taken advantage of,” says Gary Herman, President of Consolidated Credit.
It’s worth noting that not all debt settlement services are scams, although the industry has reputation issues given the number of less than ethical service providers that people have encountered in the past.
If you’re struggling with high-interest credit card debt and need to find relief, consider all of your options before you opt to negotiate a settlement. Options like debt consolidation or enrollment in a debt management program through a credit counseling agency can provide reduced payments and faster debt elimination without putting your credit at risk of damage.
Call Consolidated Credit today at or complete an online application to request a free debt and budget evaluation from a certified credit counselor.