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Debt Settlement – Not Such An Easy Way Out!

Every day there is a new ad on the radio, TV or phone call promising to reduce your interest or to settle your debts. The offers are enticing, why would you pay back the full amount at high interest rates if you don’t have to? Unfortunately there is no easy way out of debt and you may not be getting all the information you need to make an informed decision.

Debt settlement or debt reduction companies have sprung up in Canada after US Federal Trade Commission effectively shut them down across the United States leaving Canadians vulnerable. Some provinces now have legislation in place to help protect consumers.

Our Certified Credit Counsellors advise you to be extremely cautious when a company offering to help you with your finances tells you to:

  • stop making payment
  • ignore all the calls and mail from your creditors
  • pay a large fee up front

Unsolicited offers should trigger alarm bells when coming from companies that claim they can settle debts, no matter what the reason and with instant approval.

Be aware:

  • there is no guarantee that your creditors will deal with the company
  • your debt will grow bigger with interest added if you are saving up for a large payment
  • creditors may forward your accounts to a collection agency
  • your credit rating will likely become an R9, the lowest rating possible
  • you may face court action leading to judgements against you
  • you may find yourself looking at bankruptcy

When looking for possible debt solutions you should:

  • be careful of fraudulent activity such as communications from someone pretending to be your credit card company
  • do your homework - check the company’s history with the Better Business Bureau and Provincial Consumer Affairs for complaints
  • ask how long they have been in business
  • ask where are they physically located
  • ask how the company will be paid
  • ask if you can withdraw from the program and what the cost will be to do so
  • be wary of claims that sound too good to be true – they most likely are
  • explore all your options to deal with debt – your situation is unique

What might have been a good solution to your friend’s problem may not be the right one for you. Credit Counselling Canada members across the country are able to assist you to determine your options and lay out the pros and cons for each of them. The services are free or low cost and will help point you in the right direction. You decide what is best for you and your future. Our members are here to help.

The federal government’s Financial Consumer Agency of Canada has issued a warning to consumers about debt settlement claims. Find more information on debt settlement.

Credit Report Check your credit report regularly. Find out how.