Bankruptcy fraud & debt elimination scams to avoid

The DebtStoppers Don’ts Scams & Schemes to avoid to stay out of debt!

The people we counsel at DebtStoppers are usually already in pretty serious debt trouble. Often, their problems were caused by things beyond their control – like divorce, layoff or medical expenses.

But in most cases, there were things they could have done - or not done to avoid their debt trouble. They just didn’t have the information they needed to make good choices. We offer some of that information here.

Foreclosure “Rescue” Specialists

Let’s say you’ve gotten behind on your mortgage payments, and in spite of your
best efforts, the bank has sent you a notice of foreclosure. You’re in danger of
losing your home. You’re worried, you’re stressed, you don’t know what to do.
Suddenly, as if in answer to your prayers, there’s a knock on your door and a
stranger introduces himself as a foreclosure rescue specialist. And he’s going
to save getting unbearable.
your house. The truth is, though, these guys are not the answer to anybody’s
prayers. And unfortunately, at DebtStoppers we have to deal with the damage
they cause every day.

When the bank forecloses on a property, a public notice is issued in the newspaper. This is how the “foreclosure specialist” gets your name. They also send out fliers urging homeowners in financial trouble to contact them. But no matter how it starts, it usually ends with you losing your house.

This scam works in one of two ways. In the first, the “specialist” tells you that for a fee, he’ll negotiate with the bank to get your payments lowered and stop the foreclosure. In the meantime, he tells you to send your mortgage payments to him, not the bank. What usually happens then is he does nothing for you, tells you that the payments you’ve make are his “fee,” the bank goes ahead with the foreclosure. By the way, you should know that you can negotiate with your bank yourself and probably do just as well as any so-called specialist.

In the worst case, the specialist offers you a loan to save your home. Unfortunately, in most cases, the ‘loan’ is not really a loan. Instead, unbeknownst to the homeowner,

the so-called specialist actually buys the house for much less than the fair market value
and gives you just enough money to make the mortgage payments current. Moreover,
because the specialist does not agree to pay off or assume your mortgage, the you’re
still responsible for the mortgage but no longer own the property. In some instances
you’re given a limited period of time in which to buy back the house from the specialist
for a sum substantially in excess of the mortgage – and usually more than the fore-
closure rescue specialist paid for the home in the first place.

And if you want to stay in the house, you now have to pay rent to the new owner, the
foreclosure rescue specialist. That’s right, the guy who came to help took your house.

To avoid being scammed:

If you are having problems making your mortgage payments call or write to your mortgage lender immediately and
be honest about your financial situation. Ask about renegotiating your loan or working out a payment plan. The
sooner you contact your lender, the easier it will be to work out a solution.

Common sense should tell you: Never do business with anyone who comes uninvited to your door, calls you on the
phone or whose name you find on a flier.

Never sign any papers without reading them and never enter into any agreement – especially if it involves your
home – without consulting your own lawyer.

Payday Loans

A payday loan is a small (usually under $500), high interest, short-term loan. It’s also one of the worst possible ways to borrow money.

It works like this: a borrower gives a lender a postdated personal check or
automatic withdrawal authorization from a bank account. In return, the
borrower gets cash, minus the lender's fees.

The lender holds the check or electronic debit authorization for a week or two
(usually until the next payday). At that time, the borrower has the option of (1)
paying back the loan and fee in exchange for the original check, (2) letting the
lender deposit the check, or (3) renewing or ‘rolling over’ the loan.

Here’s why payday loans are so dangerous:

The loan term is short - usually not enough time to save the money you need to repay the loan. Many of our clients
find it impossible to pay back these loans in full.

If you can’t pay back the loan in full at the end of the term, it has to be renewed, extended, or more money has to
be borrowed to cover the first loan. Fees are charged for each transaction.

The interest rates that are charged are very high – 500% or more. They get away with this by calling the interest
they charge “fees.”

If the lender deposits the check to repay the loan and there are insufficient funds in your account, you’re hit with
even more fees for insufficient funds and still owe the loan company the original amount.

So if you’re can’t make it to your next paycheck, ask your employer for an advance or see if your credit union offers small loans with low rates – many of them do. Or even borrow from a friend or relative. Whatever you do, don’t get into the payday loan trap – you may never get out.

If you’re already in trouble with a payday loan company, you should think about getting professional help with your budgeting and debt situation.

Rent-to-own stores

Rent-to-own stores let you to buy new and used appliances, furniture and electronics
under long-term payment plans. And they don't check your credit. So if you have poor
credit, rent-to-own might look like a good idea – especially if something breaks or you
need something that just can’t wait. O.K., what’s so bad about paying a few dollars a
week for a computer or flat-screen TV?

What’s so bad is that by law, the stores can set their own prices. And if you take a
moment and multiply out the payments before you sign the contract, you find prices
that’ll make your head spin. Prices like these:

A GE refrigerator that sells for $430 at Sears or $448 at Lowe's, costs up to $1,700 when purchased over 24 months
at Rentway.

A Dell desktop computer, selling online for $559, costs nearly $3,500 when purchased over 21 months at Rent-A-
Center.

A 27-inch JVC television, selling for $215 on Amazon.com, costs nearly $1,000 over
15 months at Rentway.

The rent-to-own industry calls this filling a need in poor communities. I call it
predatory lending. I call it other things, too, but I can’t say them on the radio. By
the way, if you ever miss a payment, the store repossesses the item and you lose
every penny you’ve paid.

One of our clients here at DebtStoppers is a 65-year-old lady who takes care of her three grandchildren. She had
poor credit and no car. Last year, her dryer broke during a snowstorm. She couldn't wait for layaway at Sears. She
also needed a computer for her granddaughter.

So she ended up at Rent-A-Center, agreeing to pay $184 a month for both over 20 months. That’s $3,700 for items
that together sold for less than $1,000 in regular retail stores. As far as I’m concerned, they stole $2700 from a poor
lady trying to make a good home for her grandkids. DebtStoppers was able to help this lady, but there are
thousands of other folks out there who need to understand the real cost of rent-to-own.

For $3,700 my client could have bought the dryer and the computer outright. And had enough left over to send one
of her grandkids to college for a term. Instead, she dug herself deeper in debt.

So before you go to a rent-to-own store, ask yourself honestly whether or not you really need the item. Do the math
and see just how much rent-to-own will cost. And always look at all your options:

Wait and buy the item when you have saved enough money to pay cash.

Try to buy the item through installments or layaway at a department or appliance store.

Get a short-term consumer loan from a credit union or bank.

Buy the item used from a garage sale, classified ad, or second-hand store.

Go to a rent-to-own store only as a last resort.

People need to understand what rip-offs rent-to-own and payday loans are. Because if you’re not in debt trouble
now, these two scams can definitely put you there.

Home Equity Loan Scams

What Is A Home Equity Loan?

To get a loan, the lender usually requires that you give some guarantee that you will pay the loan back. For a home
equity loan, you secure the loan with your home. Typically a home equity loan works like a credit card. It provides
you with a revolving credit account that includes a line of credit and a series of checks to access the line.
What Is Home Equity Lending Fraud?

Home equity lending fraud is different than other types of fraud. Here, unscrupulous lenders seek you out, often by
phone or visiting you at home unannounced. They trick you into taking a loan against the equity in your home at
unusually high interest rates and fees. These lenders offer the loan to you whether you can pay for it or not. If you
don’t make your payments, the lender can take your home.

IF YOU DON’T PAY YOUR LOAN, YOU CAN LOSE YOUR HOME!

When you fall behind on your payments, the lender can take your home and your equity through a legal process
called foreclosure. The lender then owns your home. At this point, it is nearly impossible to get your home back.

How to Protect Yourself

The best protection against home equity fraud is to be an educated consumer. Don’t be afraid to ask other people for advice. And watch out for these red flags:

1. Documents with blank spaces (e.g., The lender gives you papers to sign and the date or the loan amount is left blank).
2. Door-to-door salesmen offering you easy credit. No reputable lender lends money to “anyone regardless of credit.”
3. Offers of debt consolidation. While such offers may seem attractive at first, they can turn out to be a very costly “convenience” (e.g., the lender offers to pay
off your credit card bills and your medical bills with the home equity loan).
4. Excessively high interest rates.
5.Excessive prepayment penalties (e.g., the loan contract with a fixed interest rate which requires that you pay a large penalty if you repay the loan early).

Tax Refund Anticipation Loans

Should you pay to borrow money that already belongs to you?

Every year at about this time there is a glut of advertising by tax return
preparers for what they refer to as “Rapid Refund”, “Fast Cash Refund”,
“Express Money”, or “Instant Refund.” Some locations even offer a chance to
play a game and double your “Instant Refund.” Some locations even offer a
chance to play a game and double your instant refund. These very tempting
offers are for you to get your anticipated refund immediately or within a day or
two. What many people don’t realize is that there is a high price to pay and
that what is being offered is actually a high-cost loan called a Refund
Anticipation Loan or RAL.

These loans are borrowed against the amount of your anticipated refund and often include extremely high interest
rates and high fees. And if you don’t get your refund or it is smaller than anticipated, you still have to repay that
loan.

RALs are extremely expensive. Loan fees typically range from $30 to $90, which translates into Annual Percentage
Rates (APRs) of about 60% to over 700%. Some tax preparers also charge a separate fee, often called an
“administrative” or “application” fee, ranging from $28 to $59 and averaging $32.

If you include fees in the calculation, RALs can cost you from 70% to 1,700% APR.

It’s Already Your Money
Your tax refund is money that you worked hard to earn. Don’t give it away. Most taxpayers don’t realize that they
can have their refund in two weeks or less even without the costly loan. To avoid the temptation of getting a Refund
Anticipation Loan and to save money at tax time:

If you have an urgent bill to pay, ask creditors for more time until the tax refund check comes from the IRS.
Don’t take on a new expensive debt to pay an old bill.

File your tax return electronically and have your refund deposited directly into your bank account. This will
speed up your refund. Some refunds will be deposited in as few as 10 days.

AARP Tax-Aide helps people of low- to middle-income, with special attention to those 60 and older, with taxes
and refunds.

Free tax preparation programs called Volunteer Income Tax Assistance or VITA sites can be found in libraries,
community centers, and other locations during tax time. They can help low- and moderate-income taxpayers
file taxes electronically.

Work-from-home Scams

We’ve all seen ads in magazines and on the internet inviting us to:

“Be part of one of America's Fastest Growing Industries!” or

“Earn thousand of dollars a month - from your home - Processing Medical Billing Claims.”

These ads may sound good, especially if you can't work outside your home, but be careful - these schemes rarely
deliver what they promise.

Many ads omit the fact that you may have to work many hours without pay. Or they don't disclose all the costs you
will have to pay. Most work-at-home schemes want you to spend your own money to run newspaper ads; make
copies; or buy the envelopes, paper, stamps, and other supplies or equipment you need to do the job. They may
also make you pay for instructions or "tutorial" software. People who’ve answered these ads have lost thousands of
dollars, in addition to their time and energy.

Classic Work-at-Home Schemes :

Medical billing. Ads for pre-packaged businesses - known as billing centers - are in newspapers, on television and on
the Internet. If you respond, you'll get a sales pitch that may sound something like this: There's "a crisis" in the
health care system, due partly to the overwhelming task of processing paper claims. The solution is electronic claim
processing. Because only a small percentage of claims are transmitted electronically, the market for billing centers is
wide open.

The promoter also may tell you that many doctors who process claims electronically want to "outsource" or contract
out their billing services to save money. Promoters will promise that you can earn a substantial income working full or
part time, providing services like billing, accounts receivable, electronic insurance claim processing and practice
management to doctors and dentists. They also may assure you that no experience is required, that they will
provide clients eager to buy your services or that their qualified salespeople will find clients for you.

The reality: you will have to sell. These promoters rarely provide experienced sales staff or contacts within the
medical community.

The promoter will follow up by sending you materials that typically include a brochure, application, sample diskettes,
a contract (licensing agreement), disclosure document, and in some cases, testimonial letters, videocassettes and
reference lists. For your investment of $2,000 to $8,000, a promoter will promise software, training and technical
support. And the company will encourage you to call its references. Make sure you get many names from which to
chose. If only one or two names are given, they may be "shills" - people hired to give favorable testimonials. It's
best to interview people in person, preferably where the business operates, to reduce your risk of being mislead by
shills and also to get a better sense of how the business works.

Few consumers who purchase a medical billing business opportunity are able to find clients, start a business and
generate revenues - let alone recover their investment and earn a substantial income. Competition in the medical
billing market is fierce and revolves around a number of large and well-established firms.

Envelope stuffing. Promoters usually advertise that, for a "small" fee, they will tell you how to earn money stuffing
envelopes at home. Later - when it's too late - you find out that the promoter never had any employment to offer.
Instead, for your fee, you're likely to get a letter telling you to place the same "envelope-stuffing" ad in newspapers
or magazines, or to send the ad to friends and relatives. The only way you'll earn money is if people respond to your
work-at-home ad.

Assembly or craft work. These programs often require you to invest hundreds of dollars in equipment or supplies. Or
they require you to spend many hours producing goods for a company that has promised to buy them. For example,
you might have to buy a sewing or sign-making machine from the company, or materials to make items like aprons,
baby shoes or plastic signs. However, after you've purchased the supplies or equipment and performed the work,
fraudulent operators don't pay you. In fact, many consumers have had companies refuse to pay for their work because it didn't meet "quality standards."

Unfortunately, no work is ever "up to standard," leaving workers with relatively expensive equipment and supplies -
and no income. To sell their goods, these workers must find their own customers.

Questions to Ask:

Legitimate work-at-home program sponsors should tell you - in writing - what's involved in the program they are
selling. Here are some questions you might ask a promoter:

What tasks will I have to perform? (Ask the program sponsor to list every step of the job.)

Will I be paid a salary or will my pay be based on commission?

Who will pay me?

When will I get my first paycheck?

What is the total cost of the work-at-home program, including supplies, equipment and membership fees?

What will I get for my money?

The answers to these questions may help you determine whether a work-at-home program is appropriate for your
circumstances, and whether it is legitimate.

You also might want to check out the company with your local consumer protection agency, state Attorney General
and the Better Business Bureau, not only where the company is located, but also where you live. These
organizations can tell you whether they have received complaints about the work-at-home program that interests
you. But be wary: the absence of complaints doesn't necessarily mean the company is legitimate. Unscrupulous
companies may settle complaints, change their names or move to avoid detection.

Credit Repair

There are a lot of scams out there and at DebtStoppers, we see the damage they cause people everyday. The
scams vary, but there’s one thing they all have in common – they all sound too good to be true. And that’s the one
thing that we can all learn to be alert for. So please remember:

If it sounds too good to be true… it probably is!

What do I mean by too good to be true? If you pay attention, you can teach yourself to listen for it in the advertising
claims these people make. Ever heard this one?

“Bad credit, no credit, no problem!” Or “We guarantee credit approval.” Sound too good to be true? It is. No legitimate
lender will guarantee credit approval. Anyone who does is looking to rip you off. Learn to listen for the scam!

Credit “repair” is another scam that comes with some pretty fantastic claims:

“Repair your credit today.” “Wipe your credit report clean.” “Erase liens, judgments, foreclosures and late payments from
your credit report – 100% guaranteed!”

Basically, what these companies promise is that for a fee, they’ll help you fight the legality of your credit card
debt. They claim that your credit card debt is illegal because of provisions in the Fair Debt Collections Practices Act or
the Fair Credit Billing Act. But the truth is, nothing in these laws makes credit card debt illegal. They may also tell you
that the credit card company held back certain information from you when you applied for the card, making their
contract with you invalid. Sounds good, but this isn’t true either.

Bottom line? If you used the card, you owe the money. That’s all there is to it.

If there’s information on your credit report that is inaccurate or out of date, you can have it removed at no cost. Get
a copy of your credit report and challenge anything that’s incorrect. If you’re right, it’ll be removed – but don’t pay
anyone to do it for you. They can’t do anything for you that you can’t do yourself – for free!

But if the information on your credit report is accurate, it will be there for up to 6 years. And there’s nothing either
you or a “credit doctor” can do about it.

If a company is promising to “erase your bad credit,” you’ve got to know that it falls under the category of too good
to be true. Walk away!

Debt Consolodation Loans

One of the things that makes people susceptible to the scams we’ve been talking about is desperation. Let’s face it,
spending months or even years worried about money can make anybody feel desperate. At DebtStoppers, if there’s
one thing we’ve seen over and over again, it’s this: desperate people make bad decisions.

Debt General Legally Eliminate Debt - DebtStoppers Don'ts

Let’s say you have a lot of high interest debt and poor credit. A consolidator wants to lend you enough money to pay
off your high interest debt at a lower interest rate. Sounds like the answer to your prayers, right?

But hold on. Ask yourself this: if you owe a lot of money and your credit has suffered, why would anyone want to
lend you even more money at a better rate? They wouldn’t. So once again, let’s all say it together:

If it sounds too good to be true… it probably is!

Basically, debt consolidators have three tried and true ways to turn your desperation into your worst nightmare – up
front fees, hidden charges and the bait and switch.

In the money up front scam, they promise you a loan regardless of your credit, but require a processing or
administration fee in advance. This fee can be thousands of dollars. You pay the fee, and then either never hear from
them again, or they tell you that there was a problem with your loan application. Bottom line: you don’t get the loan,
they keep the fee.

In the bait and switch scam, they promise one thing, and then at the last moment talk you into accepting something
not nearly as good. For example, they promise you the loan at an 8% interest rate, but when you go to sign the loan
agreement, they tell you that due to unforeseen circumstances the interest rate is 15%. You’re desperate, so you
sign the anyway.

The final big scam is hidden charges. We all know that we have to pay interest on the loan, but in some cases the
interest rate may be artificially low to make the loan appear more attractive. Then they pile on hidden charges that
dramatically increase the cost of the loan.

So here’s what you need to remember if you’re considering taking out consolidate debt loans:

Never pay an upfront fee to apply for a loan.

Make sure that all charges an fees are explained to you in advance so that you can calculate exactly what you are paying.

Don’t agree to any last minute changes and never sign any contract that contains blanks that haven’t
been filled in.

If it sounds too good to be true… it probably is.