The Financial Consumer Agency of Canada (FCAC) has just warned Canadians against companies that promise to significantly reduce the amount of debt you have left to pay off to your creditors by renegotiating it. Referred to as “debt reduction”, “debt relief” or “debt negotiation”, this process nevertheless involves some risks that you can easily avoid by taking the following points into account.
Promises too good to be true
Many companies will promise to negotiate your debts with your creditors to reduce them significantly with percentages reaching 50% or more. That said, there is no evidence that your creditors will end up accepting this debt reduction, especially since they have the right to refuse even to take part in negotiations, which will mean that you will pay fees for nothing.
There are debt reduction companies that, to gain credibility in your eyes, could make you believe that they are authorized by the Government of Canada. It really isn’t. In fact, being registered with the government in order to be able to exercise these activities legally does not mean that these companies benefit from government approval.
Check the reputation of the company
Before concluding anything, you should start by doing research to find out about the reputation of the company in question and its reliability. For this, you can contact the government office specializing in consumer issues in your province or territory, or the Canadian Council of Better Business Bureaus.
Beware of fees to be paid in advance
Many debt reduction companies may require you to pay large entry fees before you even get any debt reduction. If unfortunately the negotiations were to fail, unfortunately you will not be able to obtain reimbursement of the costs incurred, hence the need to be wary.
Stay in touch with its creditors
Your debt reduction company may ask you to sign a document allowing it to act on your behalf except that by letting this company act alone, you will be removed from problems that may arise at some point or to another.
Explore other possibilities
You would be wrong to believe everything that these companies, supposedly specialized in debt reduction, claim. Indeed, you could, for example, try to communicate with your creditors without resorting to the services of these companies whose effectiveness remains, moreover, to prove.
Or, you could consult a trustee in bankruptcy: the only professional licensed by the government (the office of the Superintendent of Bankruptcy of Canada) and who offers you protection against your creditors. Bankruptcy trustees are governed by a strict code of ethics and practice under the banner of a professional association. The trustee is your trusted ally!