Debt Relief Scams: How to Identify and Avoid Them

Corner of a city street featuring caution signs, including a Red Hand to stop, a red sign, and a One-Way sign, symbolizing the dangers and misleading directions often associated with debt relief scams.

Are you desperately looking for a way to lower your debt payments? Do you want exclusive access to loan forgiveness programs? If so, you could be the perfect target for a debt relief scam. 

Debt relief scammers steal money and sensitive information by offering vulnerable consumers precisely what they want—quick, guaranteed relief from debt—and they’re relentless in spreading their message. The average American gets as many as six calls a month from scammers, and debt-related scams are amongst the top 20 incidents reported to the Federal Trade Commission (FTC). 

So, how do you avoid falling for one of these tempting and pervasive debt reduction scams? The best defense is knowing how to spot the red flags. 

Identifying signs of a debt relief scam

Financial scams are always evolving, but the warning signs haven’t changed much in recent years. These are the common red flags associated with debt consolidation scams, credit repair scams and most any kind of financial grift: 

  • Unsolicited contact: Inbound communication, whether telemarketing, robocalls, texts or otherwise, from agencies offering you unsolicited help. 
  • Up-front fees: Fees are due before any of your debt is settled or reduced. 
  • Payment types: Payment must be made via gift card, cryptocurrency, wire transfer or other means that make it impossible to cancel the transaction and track the recipient. 
  • Guaranteed results: Promising results like quick relief from debt, guaranteed approval for a debt consolidation loan or a specific reduction in your balance, regardless of the details of your debt. 
  • Exclusive access: You’re offered access to special relief programs that aren’t available to the public or are only available for a limited time. 
  • Cutting off creditors: You must stop contacting or paying your creditors and work exclusively with the new agency.

6 tips for protecting yourself against debt relief scams

  • Set up phone protections: Use your cell provider’s device protection settings to block and flag suspicious calls. 
  • Beware of imposters: Be aware that scammers can fake professional-looking government seals, company logos, caller ID info, email addresses, and even client testimonials.
  • Slow down: Scammers often try (successfully) to confuse people and stop them from catching red flags by creating a false sense of urgency. Instead of instinctively responding, give yourself time to check the facts.
  • Verify details: Verify their contact information, agency name and other details by searching for them on your own. This step might involve contacting your creditor, looking up information about scams online or searching for the agency in the CFPB’s Consumer Complaint Database
  • Don’t share your information: When you receive unsolicited communication, don’t share or confirm any personal information or account details and don’t respond by sending money. Keep in mind that responding to texts and emails is a way of verifying your contact information. 
  • Find out what they know: Scammers will use public and stolen information, like your address or federal student loan balance to impersonate legitimate agencies. Instead of accepting this as validation, ask questions. Find out what contact information and account details they have so you can follow up by protecting the information as needed.

Like any financial mistake, falling for a debt relief scam can take some work to unwind. If you think someone has scammed you, taking immediate action to protect yourself and prevent any further losses is crucial.

The best response depends on the nature of the scam. For example, you may need to dispute a credit card or debit transaction or ask a debt settlement company for your money back. To report a scam and see suggested steps for how to respond, visit ReportFraud.FTC.Gov

3 alternatives to debt relief companies  

If you need help managing debt, there are far better options than a debt relief program, even if the program is legitimate. In most cases, you can find better help on your own, for free, without risking your finances and identity. Consider these alternatives:  

  • Debt consolidation: Use a balance-transfer credit card or a debt consolidation loan, so you can reduce your interest rates and lower your monthly payments. 
  • Hardship assistance: Reach out to your creditor directly to find out if financial hardship programs are available or if they can help reduce or defer your bill. 
  • Credit counseling: Talk to a nonprofit credit counselor to learn about debt management programs and strategies, get help with budgeting and find out if negotiating debt settlements or filing bankruptcy are options. 

Protect your identity and your finances 

It’s hard to overstate how damaging a debt relief scam can be. When you send payments to a scammer instead of sending them to your creditors, not only do you end up owing the same amount of debt, but you can also accrue ​​late fees and interest, which can damage your credit score. Furthermore, creditors may sue you for the unpaid debt. In addition, there is a possibility of experiencing identity theft or credit card fraud. 

Although any person in financial distress can be at risk of falling for these scams, all it takes is knowledge to avoid being a victim. To keep your personal and financial information secure, be cautious when responding to unsolicited calls, emails and texts about your debt.


Written by Sarah Brady | Edited by Rose Wheeler

Sarah Brady is a financial writer and speaker who’s written for Forbes Advisor, Investopedia, Experian and more. She is also a former Housing Counselor (HUD) and Certified Credit Counselor (NFCC).


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