CT BBB: Report on Debt Relief & Credit Repair

CROMWELL, Conn. — A study by Better Business Bureau® (BBB) finds that while people struggle to pay trillions of dollars in debt, many look for help from companies promising to help reduce or eliminate their debt or fix their credit score. Some of these companies make big promises, but rarely deliver, leaving people further in debt. 

BBB received over 11 thousand complaints and a thousand negative reviews about debt and credit assistance between June of 2020 and June of 2023, revealing a pattern of misleading and sometimes fraudulent claims. More than 100 of those complaints came from Connecticut residents. BBB also received more than 1,600 Scam Tracker reports, totaling $2.4 million in loses to related scams.

Consumers told BBB stories about how their dedication to plans proposed by these companies, meant to boost their credit scores or reduce crushing debt, left them worse off. 

One Connecticut resident reported paying $8,700 to a company that claimed it could help after several credit cards were taken out in her name. She says after paying Litigation Practice Group her online portal disappeared and it became impossible to reach anyone at the business. She says the company did nothing to improve her situation.

"You cannot schedule a phone call back it says that they are all taken try back next year. I've emailed multiple times for my refund with no response. And when you call the phone just hangs up on you," she reported to BBB's Scam Tracker. 

The California-based company has several alerts on their BBB business profile. It reported to BBB that it went out of business in the spring.

Another Connecticut woman said she hired a Texas-based company to remove items from her credit report, and in doing so, shared her social security number and banking information, as well as her passwords with the agent.

"This business is run by a total scam artist who claims she can help remove items from your credit report legally, well she can’t. ****** told my husband and I that she would be able to do this for us and after an entire year plus $900 later she did nothing. She had more excuses than someone going to jail," the victim reported to BBB Scam Tracker.

The woman told BBB Serving Connecticut that the transaction continues to impact her life beyond the money she lost. She said she's had trouble opening bank accounts because she believes her social security number is floating around the black market. She said her credit card number was stolen and used overseas, her email account's been hacked, and she can't access her Equifax account. 

Some states offer protections, including Connecticut, which is one of six states that requires a debt negotiator's license. While some consumers report positive experiences with the credit and debt assistance industry, this study shows there are negative patterns reported by consumers to BBB about companies in the industry, and outright scams designed to deceive and take money from consumers.

Key findings

* Predatory debt relief, consolidation, and credit repair companies advertise quick and extensive fixes for low credit scores and defaulted debt, but the ability to enact change is often much more limited than implied. 

* Consumers report to BBB the mounting fees for debt relief programs and lackluster results from credit repair businesses. 

* Many of the services offered by credit and debt assistance companies can be done by consumers themselves. However, difficulty in understanding their options, lack of know-how or a time crunch and other issues can lead some consumers to seek assistance.

Student Loan Scams

Scammers are taking advantage of recent changes to student loan repayment programs to confuse borrowers, tricking them into falling for various schemes. That's what happened to one Connecticut woman. She told BBB that the company she paid to lower her student loans claimed it could wipe away her debt after 10-years of payments. After paying more than $1,750 to Amerifed Doc Prep to get out of her old contract, she says her loan was moved to a new company, which informed her that her loan wasn't forgiven.

"I'm the first in my family to go to college, so I had no one to help me navigate student loan scams. This company has not only robbed me of money, but time. The only thing good is it's a reminder that being scammed can really happen to anybody if you're not on your toes," she reported to BBB Scam Tracker.

To speak with someone impacted by a credit repair or debt relief scam please contact BBB Serving CT Director of Communications, Kristen Johnson.

Avoid Deceptive Business Practices & Scams

Student Loans:

• Research the lender.  Visit BBB.org to read business profiles and check out companies before working with them. The FTC has consumer education related to student loan debt relief scams at ftc.gov/StudentLoans. 

• Empty promises lead to an empty wallet and more debt. Only scammers promise fast loan forgiveness. Scammers often pretend to be affiliated with the government. Scammers also promise loan forgiveness for a fee. Never pay a fee upfront for help. Never share sensitive information, such as your FSA ID.

• Find a reliable source. Consumers can apply for loan deferments, forbearance, repayment, and forgiveness, or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost and do not require a third party.
• When in doubt, contact the government agency directly. If you receive a message that seems legitimate but you aren't sure, stop communicating with the person who contacted you. Then, verify their claims by contacting the government agency they say they represent. For details on the student loan forgiveness program, visit ED.gov or StudentAid.gov.

Other Debt Relief:

· If you are in default, call debt holders yourself and attempt to negotiate a lower debt payment

· Don’t pay or provide payment information until service is rendered.

· Critically examine any guarantee made. Few, if any, companies can ensure a credit or debt company will agree to negotiate with them or adjust reports.

· Check monthly bank statements to avoid recurring charges from companies.

· Search online for free information.

· Don’t be rushed. Unscrupulous businesses and scammers both use high-pressure tactics.

· Avoid giving away personal banking information until you are 100% certain a company is legitimate.

· Refuse to work with companies that won’t tell you your rights when it comes to credit repair or debt relief.

· Be wary of anyone claiming to be associated with a government agency.

Where to report: 

Better Business Bureau: bbb.org

BBB Scam Tracker: bbb.org/scamtracker

Federal Trade Commission (FTC): 877-FTC-Help.