A few years ago the Federal Consumer Agency of Canada (FCAC) did a study of the credit solution industry in Canada and concluded with a warning to Canadians to make sure they “shop around” before selecting a firm. If you are in need of financial help in Red Deer, here are a few things you should know about potential credit solution scams.
First, the FCAC focused heavily on the fees charged by credit solution providers. Even though some Provinces have regulations about what they can charge, there is a great deal of variety across providers.
Most of these providers do disclose all their fees, but it can be hard to find them buried in reams of documentation you are asked to read and sign to join the program.
In fact, if you have read some of the horror stories you find in Internet forums from people who claim to have been scammed by a credit solution provider, the information they needed was disclosed. Canadians everywhere who are in desperate need of help are not always in a mental state that allows them to fully read and understand the fine print.
Credit counseling solutions often work out just fine for consumers with lower amounts of total debt with fewer creditors. The problems with these solutions come from the timing of the payments made to the creditors.
As you know, with a credit solution, you stop paying your creditors directly and instead make a monthly payment directly to the solution provider. If your total debt is small, and you only have two or three credit accounts to pay off, the repayments start flowing pretty quickly.
But if your debt total is high, the solution provider will hold your payments in escrow until the balance is large enough to make a settlement offer to one of your creditors. These programs can take three to five years to complete. If you have five or more creditors to repay, each with high balances, they are going to have to wait their turn.
In some cases, the timing of settlement offers is not a problem, as long as the creditors know what to expect. If you are thinking about enrolling in a credit solution program, you need to know how the provider will communicate with your creditors.
In most cases where consumers end up being sued by a creditor, the problem can be traced to lack of communication from the credit solution provider. If letters from the provider end up in the wrong department, or if an initial letter is not followed up with the timing of an expected settlement, creditors are left in the dark as to when they can expect some repayment.
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