UNDATED -- Business has been booming for one business throughout the nation's financial recovery - debt settlement companies. But you need to be very careful who you choose to help you pay off your debts.
U.S. Postal Inspector, Robert Clark said, "They were telling customers 'hey you have all of this debt, we can settle it for approximately 45% of the debt.'"
Thousands of people carrying credit card debt jumped at this offer. Clark said, "Customers who have all this debt are like you mean I have $50,000 in debt and I won't have to pay back $22,500, yeah that's what you do"."
Authorities say the debt settlement firm in this case asked its clients to sign a contract and trust the company to manage their debt. Their pitch was to suggest people sign a three or four year contract, stop talking to their creditors, and make one monthly payment to them.
The problem: 12-hundred customers said the company allegedly collected $2.2 million in fees and didn't pay off any of their debt.
Clark said, "Some of the victims we have spoken to admitted I didn't even ask what the fees were so enamored with the fact that they could stop paying off all the cards and one affordable monthly fees."
Clark also said that if a customer asked questions about fees - the operator was prepared with a response. "Salespeople were instructed initially to say 'our fees are included in the program'. And that's it. If the consumer pressed they would say well, our fees are $49.00 A month."
The company's owner was not concerned. Clark said, "His motto was 'just get them signed up' we'll deal with all of the complaints afterwards, just sign them up."
Postal inspectors say there are ways to determine whether a debt settlement firm is legit. Clark said, "If they disclose all of the fees up front and they aren't trying to rush you through the contract it may be a more legitimate business."
There's also a new law in place the requires debt settlement firms to meet with you in person to sign a contract. So if you have a company that emails you a contract, that's another red flag.
You can also negotiate payment terms with your credit card company on your own. Clark said, "Contact the credit card company, that should be the first step, and say 'hey look this is my situation can you work with me?' A lot of times they will agree to do different things for you to help you because in the end they want to be paid."
Postal inspectors say it's easy to target people with high credit card debt or anyone having financial problems because they are often desperate for an answer. In most cases, debt settlement firms buy a so-called lead list, which has phone numbers of consumers carrying excessive debt.