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Report: debt settlement companies fleecing student borrowers

Many people with financial difficulties try hard to work down their debt to a manageable level before they even begin to think about the prospect of filing for bankruptcy.

That is understandable and, provided that a person searching for solutions works with a bankruptcy attorney commanding experience and the skills to assist clients in pursuing debt negotiation, the outcome is often favorable, with the steps taken to realize it well-considered and fully explained to the debtor.

As stories that repeatedly emerge in the news readily reveal, that is far from the case in virtually every instance where a debt settlement firm is approached for assistance. A newly issued report from the National Consumer Law Center (NCLC) provides just the latest evidence charging such companies with tactics marked by fraud and bad faith. The findings indicate that the phrase “buyer beware” is perhaps no more relevant than in cases where a potential consumer contemplates contracting with such a company for its “services.”

Those services, notes the NCLC report, are virtually nonexistent in many cases. In fact, researchers found through an undercover investigation of 10 debt relief companies that those firms were routinely fleecing recent college graduates seeking relief from high student debt levels.

Commonly, such companies merely solicit the personal information needed from a client to tap into government programs that are already free and available. And in doing so, clients are often compromised through providing personal PIN and loan information, as well as being forced to sign over power of attorney to debt relief representatives and also agree to onerous arbitration clauses.

As indicated by the NCLC report, evidence that strongly undercuts such companies’ claims of helping debtors continues to pile up. Study authors are calling upon government regulators to “step up” their scrutiny of debt settlement firms and their tactics.

A proven bankruptcy attorney with a demonstrated record of assisting clients in debt relief matters can answer questions and provide knowledgeable representation to any person seeking a fresh financial start.

Source: CNN Money, "'Debt relief' firms misleading student loan borrowers," Melanie Hicken, June 21, 2013