The Manitoba Consumer Protection Office is warning consumers to be cautious in dealing with companies that say they can reduce total debt to less than what is owed, sometimes by as much as 60 per cent. This promise is tempting for consumers who are struggling with household debt, but in some cases consumers can end up owing even more money.
Debt-settlement agencies tell consumers to stop paying their creditors and put money into a separate account until they have saved a larger amount. Then, the debt-settlement company says it will negotiate with creditors to reduce the total amount owed.
Up-front fees charged by some debt-settlement companies can be significant and are not refunded if negotiations with creditors are not successful. Consumers may continue to receive calls from their creditors and collection agencies even after they have paid a significant amount of money to a debt-settlement agency.
Consumers thinking about using a debt-settlement agency should know:
• Creditors do not have to negotiate with debt-settlement agencies and may refuse any offer made.
• If minimum payments on debts are stopped, creditors may charge late fees and interest, or take other actions against consumers.
• Debt settlement may take years.
• Any unpaid debt will affect a credit rating for years.
• For-profit debt-settlement agencies do not have to provide any credit counselling.
• Financial counselling is available from financial institutions and non-profit credit-counselling agencies.
Debt-settlement agencies are contacting Manitobans directly and through advertising. The services of debt-settlement agencies are not government programs. For questions about debt-settlement agencies or help finding financial counselling support, contact the Manitoba Consumer Protection Office at 204-945-3800 or 1-800-782-0067 (toll-free) or by email at consumers@gov.mb.ca.
