Be careful about offers to help you reduce debt

TOPEKA, Kan. - If you are trying to dig out of debt, the Kansas Attorney General has a warning for you. “Don’t let debt services dig you deeper in the hole,” AG Derek Schmidt said in a statement released this week. 

Debt settlement or consolidation firms can be tempting if you are facing a mountain of debt. But the AG's office says some companies charge fees up to 15 to 20 percent of the debt.  

According to the attorney general, those companies want consumers to deposit money into an account to pay off creditors, stop working with creditors then authorize a debt settlement firm to negotiate on the consumer's behalf. 

“These companies often target consumers through direct mail or by telephone solicitations,” Schmidt said in a statement. 

Too often, the consumer will find themselves facing high fees and deeper debt.  

Call For Action brought together consumer credit counselors and members of the Financial Planning Association of Greater Kansas City. The money experts helped answer questions from 125 people who called to ask about debt and investing.

“As long as you are paying back debts, you don't have a lot of extra discretionary money to make new purchases,” said David Jackson, with the Financial Planning Association of Greater KC. “But that confidence out there it is making things a little bit more optimistic."

What is the best way to take control of debt? The Kansas Attorney General offers the following tips:

1)    Do not respond to direct mail or phone solicitations from debt settlement firms. Instead, try getting help from a non-profit credit counseling service. Contact the National Federation for Credit Counseling to find one in your area at 1-800-388-2227 or www.nfcc.org.

2)    Have all of your records in order. It is important to know what you owe and when.

3)    Try to reach out and work with creditors regarding a repayment plan.

4)     Check your credit report to make sure the debt you owe is actually yours. Identity theft is a big problem. Check your credit report to watch for any unauthorized activity. You can request a free report at www.annualcreditreport.com .