Study Finds Debt Relief and Credit Repair Companies Often Fail Consumers, BBB Warns of Predatory Practices

Debt Relief and Credit Repair Companies Fail Consumers, BBB Study Finds

GRAND RAPIDS, Mich. — A recent study conducted by the Better Business Bureau (BBB) has revealed that companies promising to reduce debt or improve credit often fall short of their claims, leaving consumers in a worse financial situation.

Katie Grevious, marketing and communications manager with the BBB of Western Michigan, highlighted the concerning findings of the study. She explained that many debt relief and credit repair companies advertise quick fixes for low credit scores or overdue bills, but the reality is far from what is promised. The study found that nearly half of those who entered settlement plans ended up dropping out before completing their payments.

Furthermore, the fees charged by these companies can cost consumers thousands of dollars, with little benefit to show for it. One Michigan woman’s experience was cited in the study, where she negotiated a contract to pay over $27,000 of her father’s debt. However, after five years, only $5,780 had gone to the creditors, while the settlement company pocketed the rest.

Grevious emphasized the importance of identifying both clear scams and legitimate businesses that are not operating ethically. She stressed that the goal should be to help consumers get out of debt and improve their financial situation, rather than exploit them for profit.

Since 2020, the BBB has received over 12,700 complaints and negative reviews about the debt relief and credit repair industry, with many of the companies in question located in the American west.

In response to the study, the BBB recommended that state and federal regulators enforce clear and upfront disclosures of fees charged by these companies. They also urged regulators to monitor advance fee payment structures to protect consumers from predatory practices.

Consumers were advised to be cautious of red flags when seeking debt and credit assistance, such as promises of guaranteed credit score improvements or high-pressure tactics to consolidate debts quickly. Scammers may also ask for upfront fees or access to bank information, which are warning signs of fraudulent activity.

Overall, the study serves as a reminder for consumers to be vigilant when seeking debt relief or credit repair services. By researching highly rated companies and understanding the services they offer, consumers can protect themselves from falling victim to deceptive practices in the industry.