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Debt Relief Scams

En español | Credit cardsMedical billsStudent loans. When debt seems like a hole you’ll never climb out of, a phone call, email, website or ad promising to settle your liabilities for pennies on the dollar can be awfully tempting. But proceed with care: Some debt relief offers are scams that will dig you in even deeper.

There are reputable companies and organizations that can help you get out of the red. They can advise you on budgeting and money management, negotiate concessions with creditors or set you up with a plan to put away money each month to pay down your debts, usually over a period of years.

Scammers, on the other hand, offer sham “guarantees” to get you out of debt quickly and cleanly — and, crucially, “they ask you to pay them before they do anything for you,” says the Federal Trade Commission (FTC). That’s illegal, and a big red flag that your would-be debt savior isn’t on the up-and-up. (Legitimate debt relief firms do charge for their services but can collect only when they get results.)

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Some take your money and run; others will string you along, collecting payments and making promises while you fall farther behind on delinquent accounts. The FTC received 20,590 consumer complaints related to credit and debt conseling in 2021, more than in the prior two years combined.

Student loan debt, which has ballooned to $1.6 trillion and is a growing burden for older Americans, is an especially ripe market for fraudsters, who collect advance and ongoing fees with bogus promises to enroll customers in government debt-forgiveness programs. Amid the economic anxiety caused by the coronavirus pandemic, consumers have been targeted by scam robocalls offering student loan replayment help and other debt assistance, the Federal Communications Commission reports.

Even with legit companies, debt settlement carries considerable risk. Many firms instruct clients to stop paying their debts, on the premise that this will compel creditors to negotiate a reduction. It might — but creditors are under no obligation to settle rather than, say, sue, and in the meantime you could accrue interest and penalties and damage your credit score. Some firms don’t fully explain the potential consequences, according to the FTC. The commission encourages consumers to carefully weigh a range of options when looking for ways to dig out of debt.

Warning Signs

  • A debt relief company asks for fees up front, before it settles any debts.
  • The company guarantees it can eliminate your debt or reduce it by a particular amount in a set period of time.
  • The company advises you to cut off communication with creditors.
  • The company won’t send you information about its services unless you provide financial information such as credit card account numbers and balances.


  • Do your homework on a debt relief service you are considering working with. Search online and check with your state’s attorney general and consumer protection agency to see if the company has been the subject of complaints.
  • Do know the disclosure requirements for debt settlement companies. Among other things, they must explain all fees for and conditions on their services, estimate how long it will take to settle each debt, and lay out the risks of stopping payments to creditors.
  • Do be skeptical of claims that a “new government program” or change in the law will reduce, forgive or cancel student loans, credit card debt or other liabilities.
  • Do consider other options for dealing with debt, such as negotiating directly with creditors or using a nonprofit credit counseling agency.


  • Don’t pay a debt relief or credit counseling service fees in advance, even if they’re couched as “voluntary” contributions.
  • Don’t believe guarantees. No company can ensure that it will reduce your debt by a certain amount or stop collection calls and lawsuits.
  • Don’t let a company enroll you in a debt relief program without reviewing your financial situation with you.
  • Don’t buy that a company can get negative information out of your credit file. If data on delinquency, defaults and other problems is correct, it stays on your credit report for at least seven years, by law.

More Resources

  • Report debt relief scams to the Federal Trade Commission, online or at 800-382-4357.
  • The FTC and the U.S. Consumer Financial Protection Bureau offer background and advice on debt settlement, credit counseling and other ways to get out from under your financial liabilities.

Updated March 30, 2022

About the Fraud Watch Network

Whether you have been personally affected by scams or fraud or are interested in learning more, the AARP Fraud Watch Network advocates on your behalf and equips you with the knowledge you need to feel more informed and confidently spot and avoid scams.

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