FDIC Consumer News - Summer 2018
25th Anniversary Edition
 Weighed down by Debt? How to Ease the Load
Excerpted and updated from “Weighed down by Debt? Here Are Ways to Ease the Load,” Fall 2010.
If you’re overwhelmed by debt, it’s crucial to find a solution. FDIC Consumer News offers a few tips.
Contact your lender immediately if you think you won’t be able to make a loan payment. Lenders generally prefer to work with customers to find a solution that benefits both parties, so ask for their help, preferably before you miss a payment. With your mortgage, it’s especially important to contact your lender or its loan servicer quickly to ask what can be done to keep your home. Programs exist to help homeowners with mortgage payment problems, but borrowers need to be proactive and reach out to their lender and respond to their requests for information.
You may also want to contact a reputable, nonprofit housing counseling agency approved by the U.S. Department of Housing and Urban Development (HUD). These organizations provide advice on housing issues, including dealing with missed mortgage payments and the possibility of foreclosure. Call 1-800-569-4287 or go to the HUD webpage at apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.
Reputable credit counseling organizations can help you develop a personalized plan to solve a variety of money problems. The quality of these organizations can vary, so interview several, check their background (including contacting your state Attorney General’s office or local consumer protection agency for complaints), get key details and costs in writing before signing a contract, and ask about any disadvantages to a proposed solution. For suggestions on finding a reputable credit counseling service, visit the Federal Trade Commission (FTC) webpage.
Be very careful of “debt settlement” companies that claim they can reduce what you owe for a fee. FTC rules prohibit debt relief services from collecting a fee until after they have settled, reduced or otherwise changed the terms of at least one of the consumer’s debts. These rules also require the companies to disclose information about how long it will take to obtain the promised debt relief.
Avoid scams. Warning signs of possible fraud by a debt settlement company or a credit counselor include demands for upfront fees and requests to start making payments to the organization instead of your creditors directly. Also be wary of promises to quickly eliminate your debts or remove negative but accurate information from your credit file. The only legitimate way to rebuild a bad credit history is to show you pay your debts on time and keep your debt to a manageable level.
Remember that you have rights when it comes to debt collection. The federal Fair Debt Collection Practices Act (FDCPA) requires that you be treated fairly and without harassment. For more information about your rights under the FDCPA, visit the FTC's webpage.