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Need Debt Help? What to Know About Credit Counsellors

Written by Kelley Keehn

Friday, May 26th, 2017

Many Canadians are looking for help to consolidate or deal with their mounting debt. But instead of a helping hand, they may be facing fraudsters waiting to prey on them, making their situation much worse.

How bad is our mounting debt?

Statistics Canada reported that at the end of 2016, Canadian households owed $2 trillion dollars1. The Financial Planning Standards Council2 revealed that one in five couldn't make it a week without running out of money if they lost their primary source of income. An Ipsos Reid survey stated that half of Canadians are $200 away from going into debt to pay bills3.

What's your first step out of debt?

Banks play a role in this process by initially working with clients to offer debt payment plan options that the client can handle.

Many people facing tough times turn to a credit counsellor for help. However, the Financial Consumer Agency of Canada (FCAC) has put out a warning to Canadians looking for help with their debt repayments. The FCAC says: "some companies are misleading consumers by promising quick and easy solutions to help pay off their debt or repair their credit. In some cases, consumers may end up in a worse financial situation than before they got help."

Laurie Campbell, CEO of Credit Canada Debt Solutions, has been warning consumers about fraudulent debt solution providers for years. “What they're offering is too good to be true. The consumer is vulnerable and often gullible – looking for a quick solution and accepting the too-good-to-be-true solution being offered."

Jane Rooney, Financial Literacy Leader, Financial Consumer Agency of Canada, warns: “It's important for consumers to understand what companies can and can't do when offering services to help with debt repayment or credit repair. The FCAC has information to help consumers better understand the types of services available to them and where to get help. Having the necessary information is the first step to empowering consumers to make informed decisions and meet their financial challenges head on4."

Campbell offers these tips and red flags for consumers to protect themselves from fraudsters:

What to Look for in a Credit Counsellor:

  • The organization is not-for-profit

  • They have a long-standing history in the community

  • They have a board of directors

  • They have a clear mission stated on their website stating what they're trying to achieve and how they're positioned to help consumers

Red Flags:

  • They pop in and out of the community

  • Their advertising and website are flashy, but lack substance

  • They're promising instant results with little effort

  • They're asking for money upfront for a quick fix of your credit report

  • They want you to sign up immediately

  • They use high pressure

  • There's little to no documentation

To help identify legitimate companies, the FCAC recommends watching for these positive signs4:

  • They don't guarantee they'll solve your debt problems

  • They don't promise to quickly and easily fix your credit score

  • They don't encourage you to take out a high-interest loan as a temporary solution until other repayment options are in place

Before signing up for help to repay debt or repair credit, consumers should:

  • Get advice from different reputable sources such as a financial advisor, an accredited credit counsellor or a licensed insolvency trustee

  • Ask questions and compare options

  • Never unwillingly submit to pressure to sign up on the spot

  • Read the fine print and understand the terms and conditions before signing a contract or an agreement

For more information, visit the FCAC's website on how to shop for a reputable credit counsellor.

Sources: 

1.http://www.cbc.ca/news/business/statistics-canada-debt-1.4025646

2. http://www.fpsc.ca/alerts-updates/2016/11/10/one-in-five-canadians-say-they-would-run-out-of-money-in-less-than-a-week-if-they-lost-their-job

3. http://ipsos-na.com/news-polls/pressrelease.aspx?id=7148

4. http://www.newswire.ca/news-releases/consumer-alert-be-cautious-when-seeking-help-to-pay-off-debt-or-repair-your-credit-618347443.html

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