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Debt Relief Scams: Twelve Red Flags and a Ten Minute Check

One federal rule catches most bad actors before you sign anything. Here it is, plus how to verify a company yourself in ten minutes.

Published June 10, 2026 · 7 min read

Debt relief attracts predators for an obvious reason: the customers are frightened, short of money, and in a hurry. The good news is that scams in this industry are unusually easy to spot, because federal rules draw a bright line most of them have to cross.

The one rule that catches most of them

Under the Federal Trade Commission's Telemarketing Sales Rule, a company that sells debt relief services by phone may not charge or collect any fee until it has settled or otherwise resolved at least one of your debts, you have made a payment toward that settlement, and the fee is proportional to the debts enrolled. The rule also requires firms to tell you up front how long results will take, how much you must save before offers are made, and that not paying creditors may hurt your credit and lead to lawsuits.

Read the rule for yourself on the FTC's website, or the current text in the Code of Federal Regulations. If a company asks for an enrollment fee, a retainer, or a "processing charge" before anything is settled, you have learned everything you need to know.

Twelve red flags

  1. Any fee before results. See above. This is the big one.
  2. A guarantee. Nobody can guarantee a creditor will settle, or promise a specific percentage in advance.
  3. "Government program" language. There is no federal credit card debt forgiveness program. Ads implying a new law or stimulus wiped out consumer debt are lying.
  4. Instructions to stop talking to your creditors. Legitimate firms tell you what mail to forward, not to go silent.
  5. Pressure to decide today. Real programs are still there tomorrow.
  6. Refusal to put fees in writing before enrollment.
  7. Advice to move debt onto a new credit line the company arranges, or to borrow against your home to pay them.
  8. Claims they can remove accurate negative information from your credit report. Nobody can. Accurate items stay for their reporting period.
  9. A new "credit privacy number" or EIN to use instead of your Social Security number. This is file segregation, and it is a federal crime.
  10. Vagueness about who they are. No physical address, no licensing information, no named principals.
  11. Asking for federal student loans. Every federal repayment and forgiveness program is free to apply for at studentaid.gov, and no one can get you a deal you cannot get yourself.
  12. Unsolicited contact by robocall, text, or a mailer designed to look like a government notice.
Nonprofit is not a credentialNonprofit status is a tax classification. It says nothing about counselor training, fee levels, or whether the organization exists mainly to sell leads. Check the actual credentials instead.

How to verify a company in ten minutes

  • Check your state. Most states license or register debt settlement companies, debt adjusters, and credit counseling agencies. Search your state attorney general and department of financial institutions or banking. If a firm that must be licensed in your state is not, stop there.
  • Check for approval where it exists. Agencies approved to provide bankruptcy counseling and debtor education appear on the Justice Department's public list at the U.S. Trustee Program.
  • Search the company name plus "lawsuit," "settlement," or "enforcement." FTC and CFPB actions are public and searchable.
  • Search the CFPB complaint database for the company name to see what other customers report.
  • Ask for the fee schedule and the contract in writing, then read the cancellation terms before you sign.

Related scams that show up in the same searches

Credit repair. Under the Credit Repair Organizations Act, these companies also cannot take payment before services are performed, and must give you a written contract and three days to cancel. Anything they can legally do, you can do free by disputing errors with the bureaus.

Advance-fee loans. A "guaranteed" consolidation loan for someone with damaged credit, requiring a fee wired up front, is not a loan.

Foreclosure rescue. Anyone asking you to sign over the deed or make mortgage payments to them instead of your servicer is stealing your house. Free HUD-approved housing counseling is available nationwide.

Fake collectors. Callers demanding payment by gift card, wire transfer, or crypto for a debt you cannot verify. Real collectors must send a written validation notice and can never have you arrested. Our guide to your rights with debt collectors covers how to make them prove the debt.

Where to report

Report to the FTC at ReportFraud.ftc.gov, file a complaint with the CFPB, and contact your state attorney general. Complaints are the raw material for enforcement actions, and they are what gets money returned to consumers when a company collapses.

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