If you’re stressed about the money you owe, a company’s promise to lower your mortgage or student loan payment might seem like a good plan. However, dishonest companies promising debt relief can make a bad situation worse.
The Federal Trade Commission filed charges against Good EBusiness Wednesday for debt relief schemes that target people struggling to pay off mortgages and student loans.
Consumers paid thousands of dollars in fees, the FTC alleges, only to find themselves out the money with no relief in sight.
Telemarketers working under various company names, including Student Loan Help Direct, used different pitches to trick people into paying for empty promises, according to the FTC’s lawsuit.
For homeowners, the defendants promised to lower consumers’ payments, reduce their mortgage interest rates, and prevent foreclosure proceedings. The company told consumers to stop making mortgage payments, but pay the company instead, according to the FTC. But when a consumer paid, he or she never got the promised modifications – or the refund the company had guaranteed.
Many consumers fell further behind on mortgage payments, racked up penalties and late fees, and risked foreclosure, Amy Hebert, consumer education specialist for the FTC said.
It’s illegal for a business to ask you to pay for mortgage relief services until you’ve gotten an offer from the lender and accepted it, Hebert said. If you're having trouble paying your mortgage or have gotten a foreclosure notice, contact your lender right away. You may be able to negotiate a new repayment schedule. Also consider other foreclosure prevention options.
Student loan debt relief
When it came to student loans, the company told consumers it could lower their monthly student loan payments, wipe out their student loan debt entirely, and remove wage garnishments. But, according to the FTC, after consumers paid none of that happened. The FTC also said many people found out the company never contacted their lenders.
You can apply for a new repayment plan for federal loans for free. If you have federal loans, debt relief companies can’t do anything for you that you can’t do yourself.
Go to StudentAid.gov for more information. For help with private loans, contact your loan servicer directly. And never pay an up-front fee for the promise of debt relief, she said.