Debt settlement is a ray of hope for people who are struggling with their bills, credits, and unpaid dues. The debt relief companies are dedicated to settling debts by negotiating with creditors. However, this maze of hope sometimes turns into a nightmare, leaving the victims in deeper financial despair. The present blog aims to highlight the stories of some real victims of debt settlement, including the notorious Mission Settlement Agency case that teaches everyone to learn some crucial lessons.
Explaining Debt Settlement
Many people are seeking the help of debt settlement companies. Debt settlement can be explained as the method of reaching an agreement between the debt collectors and the debt relief companies on behalf of debtors. However, most companies take advantage of desperate individuals by getting them onto plans that may never manifest incredible fees, illegal expenses, or outright fraud.
The Mission Settlement Agency Scam
Probably one of the most deadly, horrible debt settlement scams of U.S. history, it was perpetrated by the Mission Settlement Agency in New York, led by Michael Levitis, who promised consumers substantial reductions in their debts.
What Happened?
Through its scintillating charm of solutions, the company brought financially weak people under attack and was targeted into overwhelming credit-card debts. It made the unsuspecting feel grateful by telling them they could negotiate with their card issuers. Clients were charged advance fees to help settle debts with their credit card companies. These funds were not used for any negotiated settlement; the company misappropriated them for the owner's perquisites and to operate the business.
The Aftermath
Mission Settlement defrauded over 1,200 customers of millions of dollars. More than 1,200 victims in debt already teetered at a loss as their creditors continued to insist on demands for payment. In 2013, Levitis was convicted of fraud and sentenced to nine years in prison. The company was dashed down while its assets were seized, leaving many victims, who suffered losses at the hands of those who should have saved them, high and dry.
Other Real Stories of Debt Settlement Victims:
The Morgan Drexen Predatory Practices
Morgan Drexen was another significant company entering the debt settlement business. In 2013, the Consumer Financial Protection Bureau (CFPB) accused it of illegal practices. The company solicited upfront fees for debt relief services that, as acknowledged under the law, are criminal offers.
The victims stated they had paid several thousand dollars only to find that their creditors had not been negotiated with. Many were subsequently sued by their creditors, which brought additional anxiety and financial instability. Eventually, Morgan Drexen fell, but the damage done to its clients was irreparable.
The Case of Freedom Debt Relief
In 2017, the CFPB filed a lawsuit against Freedom Debt Relief; it was recognized as one of the largest debt settlement companies in the United States. It was found guilty of illegal and unethical marketing practices. The company could not reveal that many debt collectors would not negotiate settlements and thus would take actions such as filing lawsuits and assessing additional fees against clients.
Some victims reported that they believed everything had been fine for years and that their debts were being solved. Unfortunately, they were shocked after they woke up, realizing they would face wage garnishments and more credit damage. This sheds light on the prevalent scams that are happening worldwide.
The Price of Falling into Debt Settlement Scams:
Victims of these scams commonly suffer -
1. Further damage to the Financial Situation: The victim has additional unpaid bills and lots of interest piling up, and it gets harder to get out of the situation.
2. Credit Score Shock: Disputation during negotiation or late payment will negatively impact your credit score, making it hard for you to secure loans in the future.
3. Continuing with efforts: Distress and anxiety due to creditors, missed payments, lawsuits, and the pressures of dealing with a scam may take a toll on a person's mental health.
Reasons why people fall for such scams on behalf of debt settlement:
1. Desperation: Sometimes, sheer desperation propels people toward an immediate solution that is usually ineffective. Hence, they quickly get swayed by the promise of immediate relief.
2. Lack of Knowledge: Many times, consumers do not know their rights about lawful transactions between financial institutions and debt relief services, nor do they know what to look for in the process, which makes them easy to exploit.
3. Aggressive Marketing: Scammers lure unsuspecting individuals by using convincing ads and putting them under pressure to buy their products or services.
Lessons Learned from Debt Settlement Scams
1. Beware of Upfront Fees
Debt settlement companies that are legit should not be asking for money without having done the job. The Federal Trade Commission (FTC) has a law against it; upfront fees for debt relief programs are strictly illegal. Definite proof is your best protection.
2. Research the Company
In a situation where you are considering a debt settlement agency, go as deep as you can with the research. Go through the customers' feedback, complaints made against the company to the Better Business Bureau (BBB), if any, and the latest legal actions against them. The feedback will help you to make the right choice.
3. Understand the Risks
Negotiating a debt settlement may actually become an unintended consequence; thus, your credit report may be affected by your deeds. As some creditors may deny working out a payment arrangement, you could be sued or have your wages garnished.
4. Consider Alternatives
Credit Counseling is an alternative solution to debt settlement. A nonprofit credit counseling company is dedicated to helping you free of cost. Debt Consolidation is another method. By consolidating your bills, you can free yourself of many debts that might otherwise become extremely hard to manage. In the long run, you pay down less. Bankruptcy is the last resolution. Although opting for bankruptcy may sound extreme, it helps you start again, allowing you to fight creditors legally.
5. Read the Fine Print
Study the terms and conditions of any contract attached to it before you sign it. Remember that vague promises may result in a failure or particular outcomes.
Key Takeaways
Debt relief is a real solution to the financial problem. We cannot ignore the fact, however, that in most cases, if you take unnecessary steps, you might get scammed. The real-life experiences of Mission Settlement Agency, Morgan Drexen, and Freedom Debt Relief explain the importance of caution and educating oneself in finding debt relief options. Always make sure to be safe by acknowledging the risks, knowing your rights, and trying to see some other available options.
