Why are American debt managment firms coming to Canada?

You may have noticed a recent proliferation of telemarketing calls, TV ads and radio ads from “non-profit” debt management/debt counselling companies in the Greater Toronto Area. Almost all of these […]

You may have noticed a recent proliferation of telemarketing calls, TV ads and radio ads from “non-profit” debt management/debt counselling companies in the Greater Toronto Area.

Almost all of these companies are U.S. based, and they have been aggressively moving into the GTA because their highly questionable business practices have recently been restricted by the U.S. Federal Trade Commission.

The Spin

Here are some typical claims these companies will tell you:

  • they’ll negotiate with your creditors to reduce the amount you owe
  • using their services will have no or little negative impact on your personal credit rating
  • negative information can be removed from your credit report when you complete their debt negotiation program
  • the firm will hold your funds in a special account and pay your creditors on your behalf

The Truth

  • these companies will charge you a hefty fee before they settle or reduce your debt
  • there is no guarantee that the services debt settlement companies offer are legitimate
  • there also is no guarantee that a creditor will accept partial payment of a legitimate debt
  • in fact, if you stop making payments on a credit card, late fees and interest usually are added to the debt each month.
  • While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide accurate information to the credit reporting agencies, including your failure to make monthly payments. That can result in a negative entry on your credit report. And in certain situations, creditors may have the right to sue you to recover the money you owe.

These American companies have been moving up to Canada because our country has absolutely no regulation against these types of duplicitive practises.

Warning Signs

Steer clear of debt management companies that

  • charge any fees before it settles your debts
  • guarantee they can remove your unsecured debt
  • tout a “new government program” to bail out personal credit card debt
  • promise that unsecured debts can be paid off with pennies on the dollar
  • tell you to stop making payments to or communicating with your creditors
  • tell you it can stop all debt collection calls and lawsuits
  • claim that creditors never sue consumers for non-payment of unsecured debt
  • promise that using their system will have no negative impact on your credit report
  • claim that they can remove accurate negative information from your credit report

The Ideal Solution

If you are having problems dealing with your debts, consider contacting a government licensed trustee in bankruptcy. Most trustees (including our firm) offer a free initial consultation to explore the legal options available to you. This may include a settlement with your creditors through a consumer proposal to get you back on track.

The source of this post’s content was from the website of the United States Federal Trade Commission. Here is the link.

This post should not be interpreted as legal advice or a legal opinion. Please consult your Fong and Partners Inc. advisor to review your own particular circumstances.

© Copyright Fong and Partners Inc 2011.

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