California consumers who are buried beneath a mound of credit card debt are certainly not alone. Many individuals turned to credit to make ends meet during times of financial hardship, which has led a significant number of people to seek debt relief. Some will fall prey to scams aimed at collecting up-front fees before any aid is rendered. In the worst cases, these companies never follow through on promises to ease a client's unmanageable debt issues.
A recent court action taken by the Consumer Financial Protection Bureau (CFPB) underscores the risk of falling victim to such scams. The CFPB is asking a federal court to impose a $1 million civil fine on Global Client Solutions. Global is accused of processing up-front fees for debt relief companies across the nation. Charging fees prior to providing debt relief services is illegal.
According to the CFPB, many of those who paid up-front fees spent hundreds or even thousands of dollars for services that did not ease their debt problems. For some, their financial circumstances were actually made worse by contracting with these debt relief companies. It is the hope of the Bureau that the federal court will force Global to cease collecting these fees.
California consumers should know that any debt relief company that requires an up-front fee before providing credit card debt assistance is breaking the law. In addition, such practices should serve as a warning that the debt relief promises issued by the company are little more than a scam. For many consumers, filing for personal bankruptcy is a much safer and more advantageous path to gaining control over unmanageable debt than offers that promise a quick fix for an advance fee.
Source: Consumerist, "CFPB: Company Should Pay $7M For Processing Illegal Fees For Debt-Relief Services", Mary Beth Quirk, Aug. 25, 2014