The economic crisis has gotten many people stuck between a rock and a hard place when it comes to their finances. As a result, numerous financial institutions and companies are capitalizing on people's needs for financial counseling, debt management, and credit score improvement. Unfortunately, this has also led to a number of fraudulent companies looking
to make profit by tricking people into thinking that they are legit financial management companies. If you are thinking of getting debt consolidation, it's important to be able to tell signs that a debt consolidation company is fraudulent. This article will provide you with some information and tips on how to identify and avoid a debt consolidation fraud.

The signs

There are a number of tell-tale signs saying that a debt consolidation company is actually fraudulent. One of the most obvious signs of a fraudulent debt consolidation company is a company that does not give a complete and detailed account of what your payments are being used for. A legit consolidation company will be transparent by sending you a statement of where each and every cent of your money is going. Fraudulent companies, on the other hand, will try to hide this information from you and, before you know it, the company has already made off with your money.

***Make sure that the company that you sign up with will be sending you detailed accounts of how your payments are spent, which debts are being paid off with your payments, and how much money is going to the consolidation company itself.

Another clear sign of fraud is hidden or large fees. In many cases, it is normal to incur some sort of fee from your debt consolidation company, but the company should make it clear to you what these fees are and what they are used for. Some of the debt consolidation companies out there pose as non-profit companies, but they have many hidden charges that are not explicitly explained to you during the formulation of your debt consolidation plan.

***Avoid any company that isn't willing to openly discuss all of the fees and charges involved in your consolidation plan. One sure-fire sign that a company is fraudulent is if it asks for any form of advanced payment in return for the loan. This practice is illegal in America and Canada, making it a clear sign that the company is a fraud.

It's also important to be wary of any outrageous claims. Although it is normal to see claims the company can reduce your interest rates, you should be careful in believing some of the incredible claims made by any of them. For example, some fraudulent companies claim that they can clear your credit report of all existing negative marks, leaving you with a clean report and a high credit score.

***Make sure that you do your research on the company to see what types of services and products they offer. Also make sure that their operations are legal.

Finally, another clear sign of a fraudulent company is one that asks you to perform illegal actions. It may not be blatantly apparent that the company is asking you to break laws, but there are some tactics that fraudulent companies use to get you to do illegal things. For example, some companies might try to convince you to create a new identity to start with a clean slate on your finances.

***Be careful with these suggestions, because you can easily be charged with fraud yourself, leaving you with extra charges to pay and perhaps even prison time.

What to do

The first thing you should do when you find a fraudulent debt consolidation company is to alert the officials. File a complaint with the Federal Trade Commission and provide as much information on the company as you can. The Federal Trade Commission is mainly responsible for regulating the marketplace by preventing unfair business practices such as fraud. The Federal Trade Commission can be contacted online at www.ftc.gov, where you can also find their phone numbers in case you need to seek advice or file complaints. Once you filed your complaint, you can ask for advice on what to do next about the situation. Make your case public by posting about the fraudulent company on various websites, such as those of
the Better Business Bureau and the Internet Crime Complaint Center, to help others avoid falling victim to the company.

Also, make sure to contact all of your banks, lenders, and creditors to report the fraud to them. In most cases, a fraudulent debt consolidation company will ask for your personal and financial information, including bank account numbers and credit card numbers. It is important to notify all of the parties involved so they can freeze your accounts or take
necessary steps to help solve the problem.

Tips

* The best way to avoid fraudulent companies is to only trust companies that are well known and well received by consumers. Visit websites that review and rate companies based on consumer reports. Make sure that the debt consolidation company you are considering has a good rating. If the company is not listed or it has negative reviews, don't even think twice, cross the company off your list and look for other options.

* In line with the tip above, another way of avoiding fraud is to only deal with companies that often get positive reactions from the media.

* Make sure that the company has a good privacy policy that will secure all of your data and information from hackers and other forms of identity theft.

* Only deal with companies that are willing to make negotiations with you on your debt consolidation plan. Make sure that the company is transparent with regard to the fees, services, and rates that apply to your plan.

Don't be another victim of identity theft or faulty debt management plans. Think twice before you settle for any decision or plan. Instead of having the representatives tell you what to do, get involved with setting up a good plan. Consider your goals and the steps you are willing to take.