When is debt help too good to be true? How to spot 7 red flags

By Gina Freeman

Reviewed by Jill Cornfield

Jun 30, 2024 - Updated Jul 02, 2024

Read time: 4 min

Family finances - husband and wife calculating home expenses

Key takeaways:

  • Many sources of genuine debt help can tackle different types of debt problems.

  • Legitimate debt help providers are transparent and follow strict laws.

  • Shady companies make unrealistic claims. Debt help is real, but it’s not magic.

There are several ways to break free from debt and reclaim your life. And it’s not difficult to find legitimate sources of debt help. But let’s be clear: getting out of debt doesn’t happen instantly. Debt help has advantages and drawbacks—and takes time, effort, and commitment. 

There is no magical debt fairy.

How to tell if debt help is legit

Having too much debt is scary, and reputable services can help you out of your jam. But there are also shady outfits looking to take advantage of your fear. Don’t let them. Scammers may take fees upfront and then do nothing to earn them. Or, worse, steal the money you’ve saved to give to your creditors. 

Here are seven big red flags to clue you in about debt help providers with bad intentions.

1. The “new government program”

If you spend any time at all online, you’ve probably seen ads disguised as news articles proclaiming a “new government program” ready to bail you out, or promising “you now have the right” to walk away from debt. 

There’s no such thing. You have certain rights regarding debt, and so do your creditors. A reputable professional knows how to balance everyone’s rights while acting legally and responsibly. 

2. Promises to instantly stop all debt collection calls and lawsuits

First, the Fair Debt Collection and Practices Act allows you to stop debt collectors from contacting you if you ask them to. However, that law doesn’t apply to original creditors like your credit card issuer. Your state may have laws that let you stop original creditors from contacting you about past-due accounts.

In any case, you can easily ask them yourself if you don’t want to be called, or only want to be contacted in specific ways or at certain times. More importantly, stopping all contact can push creditors to sue you. It may do more harm than good, and a good debt professional will tell you that.

Leave debt behind, so you can move forward

Get rid of your debt and free up your cash flow without a loan or great credit.

3. “Pennies on the dollar”

That phrase is a pretty good tipoff that you’re dealing with slippery salespeople. No one can guarantee specific results. It’s possible to settle a debt for pennies if the debt is very old and was purchased by a debt buyer at a very deep discount. But if it’s a past-due account with your credit card company, settling for pennies is extremely unlikely. 

Creditors aren't required by law to negotiate with you, and they decide how much they’re willing to forgive. The result may depend on what they think you can afford to pay, if you can prove a qualifying financial hardship, the age of the debt, the creditor’s policy, and your negotiating skills. 

4. Guarantees of specific results

When you borrow money, you enter into a contract with your creditor. And your creditor has the legal right to enforce that agreement. They have no obligation to negotiate with you or forgive debt if your situation changes. And so it’s not legally possible for a debt help provider to guarantee any percentage of debt forgiveness. 

That said, most creditors are willing to at least consider forgiving some part of your debt if they believe that it’s the best option for their bottom line. 

If a debt resolution provider promises they can wipe out “half your debt,” tread very carefully or look for a more reputable partner. Also, some companies don't include their fees in their promises of how much they can reduce your debt—so their claims of how much money you can save are overstated. Make sure to read their fine print about such claims.

At Achieve, we don’t guarantee a specific amount by which we can reduce your debt. However, unlike other debt resolution providers, we do have a program guarantee—because our program is designed to help you succeed. The program guarantee means that if your total program cost and fees are more than the amount of debt you enroll, you can get a refund for the difference, up to 100% of collected fees.*

5. Off the grid

Another mark of less-than-reputable debt help companies is that they don’t want you to communicate with your creditors. This is almost never a good idea and could cause your creditor to sue you. Or the scammers might be stealing from your debt resolution fund instead of paying your creditors, and they’re trying to hide that fact.

6. They come to you

If they can’t get you to call them with their bogus ads, scammers might contact you out of the blue. Legitimate debt help services don’t chase down customers and don’t deploy high-pressure sales tactics. Hang up, block, ignore. Or file a complaint with your state or the Consumer Financial Protection Bureau.

7. They ask for payment up front

This is the biggie. It’s against the law for debt resolution providers to take payment for services before earning it. That means after they negotiate an arrangement with your creditor, and you agree to its terms, and you authorize at least one payment to the creditor. Only then has a debt help company earned its fee. 

No magic involved

Real debt help from reputable services can give you breathing room and help you right your financial ship—not play you for a fool and take your money. You’ll know a firm is legitimate because they’ll never sugarcoat what they do, and they won’t pretend to solve all of your problems with the wave of a wand. 

*The guarantee takes effect when you complete your debt resolution program—or even if you leave before finishing. When you exit the program, we’ll use the combined total of all the debts you enrolled and settled, and the fees you paid to us, to calculate your eligibility for a refund.

Gina Freeman - Author

Gina Freeman has been covering personal finance topics for over 20 years. She loves helping consumers understand tough topics and make confident decisions. Her professional history includes mortgage lending, credit scoring, taxes, and bankruptcy. Gina has a BS in financial management from the University of Nevada.

Jill Cornfield

Jill is a personal finance editor at Achieve. For more than 10 years, she has been writing and editing helpful content on everything that touches a person’s finances, from Medicare to retirement plan rollovers to creating a spending budget.

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