Protecting yourself

Beware letters claiming quick, easy debt relief

Susan Ladika

They’re some of the strangest letters I’ve ever received – letters from two unnamed companies claiming they can slash my supposed debt by up to two-thirds.

But it’s anyone’s guess who these companies are, and what they really do. Neither letter contains a company name, and only one has a return address – an office building in West Sacramento, California.

And just getting a letter offering to reduce your debt doesn’t mean you really owe anyone anything. One letter states: “Any financial information contained herein is for example purposes only and does not reflect any actual debt you may or may not owe.”

Say what?

This unnamed company claims it’s going to cut my debt by two-thirds, but then says I may not have any debt?

The same company also uses scare tactics to try to get you to call their toll-free phone number. The letter bears a warning in red: “Failure to respond may affect your legal rights.”

The California letter, which purports it will cut my debt in half, says: “Any court costs and case expenses will be the responsibility of the client.” But there’s no explanation of what court costs and other expenses might be involved.

While I just shake my head over the absurdity of these letters, if you really feel like you’re drowning in debt, letters claiming to slash your debt might seem like a lifeline.

But experts warn you should run the other way. “Your best course of action is just pitching it in the recycling bin,” says John Breyault, a vice president at the National Consumers League. “Shady debt settlement companies have been around for quite a while.”

A legitimate company “would never make claims like that without reviewing your particular case,” Breyault says.

The Consumer Financial Protection Bureau warns that debt settlement companies claim they can change the terms of your debt, such as reducing the balance, interest rate or fees you owe, and they often charge a pretty penny to try to negotiate your debt – something you can try to do on your own.

Bruce McClary, vice president for the National Foundation for Credit Counseling, finds the mention of legal rights “very unsettling. It conjures up lots of images of lawsuits and legal action against the recipient. It makes the recipient feel like the house is on fire, and they have to act immediately.”

The letter’s goal is to get you to act “before you have time to question if it’s truly legitimate,” McClary says. “They might rope you into an offer that you might regret later.”

The letter with no return address states you might be referred to a nonprofit or for-profit debt relief company. But McClary says, “I seriously doubt any nonprofit is involved in this.”

Breyault says the letters also may run afoul of the debt management plan.

With a debt management plan, the debtor agrees to make a single, regular payment to the counseling firm, which disburses it among creditors on an agreed-upon schedule. Lenders, such as credit card companies, often will reduce interest rates and/or extend the time for repayment to help consumers committed to erasing their debts.

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