RALEIGH, N.C. (WNCN) — Holiday debt has skyrocketed this year as people spent more this season than last year with more than half that debt placed on credit cards.
Now, as the new year begins, folks are trying to deal with that debt and companies claiming to provide debt relief are abounding.
When it comes to spending, a new survey by Fidelity found almost half of us want to save money in 2022, pay down debt and spend less and there’s a reason for that.
This holiday season the average person incurred more than $1,200 in debt, piling most of that on to credit cards according to a new report by Lending Tree.
That holiday debt is on top of previous debt incurred during the pandemic.
All that debt means many of us now are struggling to pay our bills.
That leaves a ready market for companies that say they can provide quick debt relief.
“A lot of people get into deeper debt by dealing with a debt relief company,” said Alyssa Parker of the Better Business Bureau of Eastern North Carolina.
That’s because many of those companies are just out to extract more cash from you at a time when you are cash strapped by charging excessive fees which are illegal in this state.
Parker said North Carolina has restrictions on how debt relief companies can work and what kind of fees they can charge
“Be aware of these companies, especially out of state ones, don’t know our state laws and aren’t acting in accordance with them,” she said.
In this state, credit counselors cannot charge more than $40 to set up a debt management plan. They also cannot charge fees of more than $40 a month for their services.
Many of these firms demand an upfront fee before doing any debt removal work. That’s a red flag because, in North Carolina, it’s illegal to charge an upfront fee for debt settlement services.
Among other the red flags that a debt relief company is defrauding you:
- Guarantees debt elimination in a set period of time
- Wants financial information such as credit card numbers and account balances
- Advises cutting off all communication with creditors.
Cutting off communication is the worst thing you can do, said Parker.
“Reach out to creditors directly,” she said. “They are going to want to work with you so they can get some sort of money back.”
There are also several non-profit credit agencies like American Consumer Credit Counselling Inc. that can help you.
There are other free resources available online to help you get your financial house back in order including aid from the Federal Trade Commission on how to cope with debt.