How to Reduce Your Debt and Avoid Debt-relief Scams

Quebecers are dealing with high levels of debt, made worse by high interest rates, the highest in more than 10 years. Many consumers are also seeing their credit scores affected by their financial situation. For some people, borrowing money to cover everyday expenses has become more common, which can make debt even harder to manage.

The Office of the Superintendent of Bankruptcy (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) released a joint alert during Financial Literacy Month 2023.

Published for the second year in a row, this alert is meant to help Canadians recognize possible debt-relief scams. It also explains five common warning signs of debt-relief fraud.

Indicator #1: Unrealistic Promises

Unregulated credit counsellors often make unrealistic promises. They may also pressure people into making quick decisions. Some counsellors claim they can eliminate your debts without first reviewing your financial situation. As a result, they push you to act too quickly without taking the time to look at all the debt-relief options available to you.

Indicator #2: Offering a “Better Solution”

If an advisor asks for payment before a meeting or before providing any service, this may be a warning sign. They may also make false promises, such as saying they can offer a faster repayment plan. For example, they might claim they can get you a better deal with your creditors or offer a solution that better protects your interests.

Indicator #3: Charging Unnecessary Fees

This refers to charging unnecessary fees that do not help reduce your debt. Instead, these extra costs can make your financial situation even more difficult. These fees are often hidden as “shipping costs” or “administrative fees.” For example, an advisor may say they can give you more options by adding a debt assistance service for an extra charge.

Indicator #4: Claiming They Can Negotiate With Your Creditors on Your Behalf

An unlicensed credit or debt counsellor may tell you to cut ties with your creditors. They may also suggest that they speak to your creditors for you and represent you during the process. However, under the law, only Licensed Insolvency Trustees (LITs) can legally negotiate with creditors on your behalf. Even if a counsellor says they represent you, your creditors are not required to work with them.

Never stop talking to your creditors or making your monthly payments without first speaking with a LIT. Licensed Insolvency Trustees are the only professionals who can provide debt management solutions. No matter the type of unsecured debt you have, including student loans, lines of credit, or credit card debt, a trustee can guide you toward the right option.

A LIT also offers credit counselling as part of their services. These counselling sessions are designed to help improve your credit score and reduce the risk of falling back into debt.

Indicator #5: Offering Online-Only Services

Be careful with debt-relief companies that only offer services online. The same goes for companies that do not have a physical office or are not based in Canada. You should also be cautious of organizations that share little information about themselves on their website.

A good rule is to look elsewhere if a debt-relief company only operates online. The same applies if they do not clearly mention in-person services in Canada or in your province.

The alert issued by the OSB and CAIRP shows how important it is to stay careful when looking for debt-relief services. Knowing the warning signs listed above can help protect your finances. Promises of quick fixes and pressure to make fast decisions should always be taken seriously. You can read the full consumer alert here to learn more.

This alert is an important resource for Canadians looking for debt-relief options while avoiding possible scams. Taking time to research your options and speaking with a Licensed Insolvency Trustee (LIT) can help you make informed choices. At M. Roy & Associés, our professionals are committed to offering honest debt-relief solutions based on your unique situation. Our team values transparency by avoiding unnecessary fees and keeping clear communication throughout the process.

Meet with a member of the M. Roy & Associés team today to find a solution that helps you repay your debts. From consumer proposals to debt consolidation loans, your LIT can guide you toward repayment. Schedule a free, confidential consultation by calling 1-877-352-6661 or by filling out the online form.