Debt Settlement

Learn who is eligible and when it’s the best option for dealing with your debt.

How to Avoid Debt Settlement & Debt Relief Company Scams | Canada

By Jordan Evans 

Q: I keep getting telephone messages from a company that says I can get a 3 month break from paying my credit cards. They also say that I can settle my debts with my creditors and get out of debt sooner. It sounds great, but why would my creditors go along with this?

A: When something sounds too good to be true, it often is. We have been getting increasing numbers of complaints from consumers who entered into an agreement with different debt settlement companies only to find out that most of the money they paid to these companies went to pay fees. Worse yet, the people were now months behind on their payments and in many cases their creditors are taking action against them.

3 Ways to Spot a Debt Settlement or Debt Relief Scam

There are 3 things to be wary of if you are considering using the services of a debt settlement company:

  1. They require you to pay most of their fees up front before any of your money is used to settle your debts.
  2. They make unrealistic promises without any understanding of your financial situation. The truth is they have little if any influence with creditors.
  3. They tell you to stop talking with your creditors.
Confused woman listens to a credit counsellor

Pay Attention to the Details of Your Debt Settlement or Membership Agreement

Make sure you read and review the agreements from these companies carefully and pay close attention to the breakdown of the payment schedule. Are the majority of your payments applied to their fees first, before accumulating funds to settle your debts? Reputable credit counselling companies don’t require you to pay their fees up front before delivering any tangible service.

As the saying goes, “there is no free lunch;” everything comes at a price. If you stop making payments on your credit cards, it will negatively impact your credit rating…for years. It could also cause your creditors to initiate collection or legal action against you. That’s a heavy price to pay for a 3 month break from making your payments.

How to Choose a Good Debt Relief Agency

If you want your creditors to work with you when you are experiencing financial problems, you need to keep the lines of communication open. Refusing to speak with your creditors will not help you to gain their understanding or cooperation.

My advice here is the same I would give you when choosing any service; do your homework and check this company out thoroughly before signing anything. Also listen to your inner voice, it’s usually right and knows when to walk away. I suspect that after doing your homework your inner voice will be telling you to run not walk away.

See if debt settlement makes sense for you.

Speak with a non-profit credit counsellor.

Debt settlements are just one of 7 debt relief options available in Canada (5 are available in all provinces). Before deciding to pursue a specific option, it would be wise to speak with a credit counsellor, review your situation, and determine which option is going to help you achieve your financial goals. Speaking with our counsellors is always free and confidential.

Related Articles

Debt Settlements

Settling your debts for less than you owe is not a common way to deal with debt. Here’s why.

Debt Settlement Dangers

Working with a for-profit debt settlement company can cost you. Here’s what to watch out for.

Risks & Consequences

Be aware of what’s at stake when you settle your debts with a for-profit company.

 

16 Comments

  1. Rev. Donald G. Brett

    I’m wondering if DebtPros is a legitimate company.

    Reply
    • CCS

      We see that this company promotes consumer proposals. To administer a consumer proposal, you have to be licensed as a bankruptcy trustee (now called Licensed Insolvency Trustees). You can view the list of bankruptcy trustees here: https://www.ic.gc.ca/app/scr/tds/web

      We don’t see the company’s name on the list, nor do we see the names of any of their employees. So they cannot legally provide you with these services. What does happen, though, is that some debt consultants will charge you for these services and then refer you to a trustee who will charge you all over again. Some companies will also pretend that the bankruptcy trustee works for them when this is not true and is illegal. We don’t know exactly what this company is doing, but how they have framed their services on their website is concerning to us. We would suggest that you find a bankruptcy trustee by doing a Google search or by getting a referral to a reputable trustee from a non-profit credit counselling service. You are welcome to contact us as well to get an unbiased review of your options. Our staff are not paid on commission, so they have no incentive to steer you towards a particular solution and will instead help you figure out what is in your best interest.

      Reply
  2. Joel Cook

    I would like to just find a way to take care of my debt, I am not sure if I should declare bankruptcy or what,the stress of it is wild, any suggestions, not even sure how much I owe1

    Reply
    • JLock

      Hi Joel, it sounds like you have a lot on your plate and you’re not sure what to do next. The good news is there is always a way out of debt no matter how stressful it feels at the moment. You may benefit by speaking with one of our certified credit counsellors. They will discuss your current situation and go over all of your options, including bankruptcy. Whenever you’re ready, give us a call at 1-888-527-8999 we have counsellors standing by and ready answer all your questions.

      Reply
  3. Chad Trollope

    Is credithelper. Ca a legitimate company as far as BBB says they are accredited an a+ but they ask for fees first an offer a credit rebuild is this correct

    Reply
    • CCS

      Hi Chad, that website appears to be promoting their car loans as a way to build credit. If you don’t actually need a car, then this would be a waste of money. Getting any kind of credit product and making payments to it on time will work to rebuild your credit just as well as a car loan from this company. We recommend that you get a credit product that’s actually helpful for you, like a secured credit card that you can make everyday purchases on.

      Please note that there is no need to pay anyone to help you fix your credit. There are lots of knowledgeable people who are happy to help you for free. We’ve actually created a popular webpage that tells you how to fix your credit for free: www.mymoneycoach.ca/credit/fix-credit

      This page contains all of the tips and tricks that actually work. In addition to that, if you’d like to sit down with someone and have them personally give you recommendations and answer your questions, make an appointment to speak with one of our credit counsellors for free. Bring a copy of your credit report with you. Show it to them, and then ask them how you can improve your credit. They will tell you what’s good and bad about your credit report, what you need to do to improve your score, and give you an idea of how long it will take to clear things up. You can also make an appointment to speak with someone at your bank. It’s possible they might also be willing to give you some pointers for free. There’s no need to pay a salesman for the same information you can get for free elsewhere.

      Reply
  4. Brayden

    Hey was wondering if debtreview.ca was legitimate. Thank you

    Reply
    • CCS

      Hi Brayden, on that company’s website, they claim to provide consumer proposals and bankruptcy. They also claim that “Once you obtain our services . . . Your creditors will legally no longer be allowed to contact you.” To do this, you have to be licensed as a bankruptcy trustee (now called Licensed Insolvency Trustees). You can view the list of bankruptcy trustees here: https://www.ic.gc.ca/app/scr/tds/web

      We don’t see the company’s name on the list, nor do we see the names of any of their employees. So they cannot legally provide you with these services. What does happen, though, is that some debt consultants will charge you for these services and then refer you to a trustee who will charge you all over again. Some companies will also pretend that the bankruptcy trustee works for them when this is not true and is illegal. We don’t know exactly what this company is doing, but how they have framed their services on their website is concerning to us. We would suggest that you find a bankruptcy trustee by doing a Google search or by getting a referral to a reputable trustee from a non-profit credit counselling service. You are welcome to contact us as well to get an unbiased review of your options. Our staff are not paid on commission, so they have no incentive to steer you towards a particular solution and will instead help you figure out what is in your best interest.

      Reply
  5. kim

    any thoughts on ccdr

    Reply
    • CCS

      Hi Kim, if you are referring to Canadian Customer Debt Relief in Saskatchewan, then that company does provide legitimate debt settlement services as far as we know. However, CCDR cannot stop any legal action against you (which they advertise on their website). Only a licensed insolvency trustee can do this, and what CCDR likely does is charge you for a referral to a trustee. You should always explore all of your options, but we recommend that if you do need a trustee, you find one directly without paying a referral fee. We can also help review your situation or refer you to a reputable trustee near you for free.

      Reply
  6. Ron S

    Ron S. Hi Debtless credit are giving me a $1000 limit visa credit card for a upfront 20.00 activation fee via e transfer they gave me Are they legite

    Reply
    • CCS

      Hi Ron, unfortunately, we’ve never heard of this company. We also can’t find them on a Google search or on the Better Business Bureau’s website. We would not recommend dealing with any financial company that you cannot verify is legitimate. There are lots of legitimate credit card companies out there, so there’s no reason to take a risk on something like this.

      Reply
    • Neil

      Hi I have seen advertisement for for a company called ‘Debt Support Canada.’
      Can you tell me if they are a reputable company?
      Is a consumer proposal a good way to address a student loan over 7 years old?

      Reply
      • CCS

        Hi Neil, like “Debtless Credit,” we’ve never heard of “Debt Support Canada” and would not recommend dealing with any financial company that you cannot verify is legitimate. As for your other question, a consumer proposal can address a student loan debt over 7 years old. However, whether that’s the best option for you depends on your situation and needs. We can help you figure that out, and you can also get a second opinion from a licensed insolvency trustee (we can refer you to a reputable one for free).

        If a consumer proposal ends up being your best option, it’s important to realize that no one but a licensed insolvency trustee can legally do this for you. If a debt consultant company advertises that they can, it’s not true. They’ll just end up sending you to a trustee themselves after charging you a fee. You can get the same results or better by going to a trustee yourself – plus save thousands of dollars in extra fees the debt consultant company could charge you.

        Reply
    • Jakki smith

      Do you have a phone number or email contact for debtless credit? I am currently being charged by them without my permission and desperately need to find out their information

      Reply
      • CCS

        Hi Jakki, we sent an email answering your question to the address listed on your account. If you need any other help, please give us a call at 1-888-527-8999.

        Reply
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