Federal financial consumer protection agency sounds alarm about credit repair companies

  • Companies that encourage you to take out a high-interest loan to pay off your other debts

Some agencies encourage you to take out a high-interest loan to pay off your debts with the promise that they can negotiate a better deal with your creditors or settle your debts in the meantime.

“Be aware that some companies make money from fees, set-up costs and interest. You may still be carrying debt after the process is over,” noted FCAC.

Some of these businesses may offer to file a consumer proposal or bankruptcy for you for a fee. Be aware, though, that “only a qualified licensed insolvency trustee can help you with a consumer proposal or bankruptcy. Their advice on these two options is typically free,” according to FCAC.

Licensed insolvency trustees are licensed by the federal government’s Office of the Superintendent of Bankruptcy.

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Consumer proposals entail paying a portion of your debts, and generally allow you to keep your assets, including your house. Bankruptcy absolves you of many debt charges but normally forces you to sell your assets, with some exceptions.

  • Companies that misrepresent services they offer as being part of a government program

Need to fact check whether the debt solution you’re considering is really government sponsored? You can contact the government department or agency responsible for the program. “Ask them to confirm that the company’s representation is genuine,” said the FCAC.

READ MORE: Questions to ask yourself before taking on more debt[6]

Things to do before signing up for a debt-repayment program

Here’s the due diligence the FCAC recommends you do before you sign on the dotted line:

  • Get advice from professionals such as a financial adviser, an accredited credit counsellor or a licensed insolvency trustee
  • Read the fine print and compare your options
  • When contemplating a consumer proposal or bankruptcy, ask “Are you a licensed insolvency trustee?”

READ MORE: What affects your credit rating and how can you improve it?[7]

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