The COVID-19 pandemic had a major impact on the debt of U.S. households. In fact, Americans added a staggering $800 million to their debt load in 2020, an increase of 6% over 2019 (Debt.org).

If you’re struggling with a large amount of debt from credit cards or loans, an offer to minimize or even erase your problems can be extremely tempting. And there are legitimate companies out there that can help with restructuring and managing debt issues. However, predators are also vying for business and preying on the desperate. How can you tell if you’re dealing with a real company or a real scam? Watch for these flags.

1. Payment is due up front. According to the FTC, requiring payment up front for debt relief services is actually illegal. Real companies do charge for their services, but they don’t get paid until they produce results. Even if the payment is touted as being voluntary, don’t pay up front for services.
2. Results are guaranteed. As with most scams, if it sounds too good to be true, it likely is. Debt relief carries risk, and any company promising to completely eliminate your debt within a certain time period is likely bad news. Also, a promise to wipe your credit history clean is always false. The best way to repair credit is to pay down debt, make on-time payments, and manage finances responsibly—all great actions that will take time.
3. They advise you to cut off communication with creditors. This is really bad advice. If you’re experiencing difficulty making payments, the worst possible action you can take is to stop talking to your creditors. Many lenders have programs and policies to help you in times of need—but to find out about them, you need to be up front with your creditor.
4. They want your information first. If you’re asking about debt relief services, and the company won’t send you information before you provide your own financial information, find a different company. Best case scenario, a company with this practice isn’t going to be a good partner for you. Worst case, you aren’t dealing with a company at all, but a scam.
5. They want to enroll you before reviewing your situation with you. Debt relief services have pros and cons. Don’t allow a company to enroll you in a program without having all the details and discussion about pitfalls.
6. They contacted YOU. Consistent with most scams, if a supposed company reaches out without any request or prompting from you (e.g. you didn’t call the company or fill out a contact request form), and especially if you have never done business with the company, you’re likely dealing with a scam.

There are some good ways to keep yourself safe if you’re exploring debt relief services.

• Do your homework. Several organizations keep tabs on these types of companies and can provide a wealth of information about their reputation and business practices. Check with your state’s attorney general and consumer protection agency for more information.
• Know your rights. The Federal Trade Commission has rules regarding the practice of debt relief. Know what these companies can and can’t do.
• Stay away from “new” practices or companies touting brand new laws. This is a common advertising tactic that doesn’t necessarily translate into results.
• Consider all your options. Dealing with a debt relief agency isn’t your only option in most cases. Working with your creditors and lenders directly can open up more options for dealing with your debt. Nonprofit counseling agencies are also a really great options for making plans to become debt free.

If you have been taken advantage of by a fraudulent company, report it to the FTC.