Question: Debt relief service companies often mail notices to consumers with the promise that debt can be eliminated or reduced. Can these companies actually do what they promise, and is there a fee involved?

Answer: Consumers should exercise caution when considering signing up with these companies.

For-profit debt relief is illegal in Hawaii. Consumers should be skeptical of unsolicited offers from companies claiming they can help you eliminate your debt. You should never pay advance fees to any for-profit company offering to provide debt relief services, because it’s illegal under federal law.

You can check out the companies before doing business with them through the Better Business Bureau or the Hawaii Department of Commerce and Consumer Affairs.

The Hawaii debt adjusting law does allow nonprofit credit counseling agencies and licensed Hawaii attorneys to provide debt counseling services to persons who need it. There are legitimate nonprofit credit counseling agencies here in Hawaii who can help people with their consumer debt problems.

The Hawaii Office of Consumer Protection worked with the Consumer Financial Protection Bureau last year in a joint multistate investigation and judgment against a for-profit Florida debt relief company who illegally collected advance fee payments from Hawaii consumers and provided little or no debt relief.

Q: How do these debt relief service companies find out about consumers’ debt, and is there anything that can be done to prevent them from obtaining that information?

A: Debt relief companies obtain your contact information from many sources. However, they most often solicit potential clients on the Internet, through newspaper ads, late-night TV promotions, through the mail or through telemarketing calls. Once you respond, they ask you for personal, financial and other information which are then used by the companies. The best policy is never give out personal, financial or other information to people you’ve never dealt with before.

Q: What should a consumer do who has been scammed?

A: Report it immediately. Contact their bank or credit card company if they believe the scammer has obtained information about their accounts. Contact local law enforcement agencies if they have lost money, valuables or personal information in the scam. Contact credit reporting agencies if their Social Security number, credit cards or financial account information was stolen. 

Q: A lot of banks are targeting consumers with offers to transfer their credit card balances from one card to another to get a lower interest rate. While there often is a fee attached to the transfer, recent offers have included no-fee transfer offers. Is this a good deal for consumers, or are consumers simply moving their debt around?

A: Transferring your credit card balance to another credit card to get a lower interest rate may or may not be a good deal. When you transfer your balance from one card with a higher interest rate to another card with a lower interest rate, you are in essence paying off your old debt with a new one.

Often transfer cards will entice consumers with an extra-low annual percentage rate which will increase after a set period of time. Before transferring your credit card balance, you need to calculate all the costs, including the annual percentage rate during and after the introductory period, the minimum monthly payment and any other costs of transferring the balance. 

You can save money over the long haul if you pay back the money owed and all the costs of the new card and pay it at a lower interest rate. But if the fees are too high, the length of the low interest rate too short or the minimum payment too high, then it may not be a wise financial move. 
   
Q: There has been a lot of negative news the last couple of years about problems homeowners are having in obtaining mortgage loan modifications. Some lenders — not necessarily the ones that own the lien — have recommended that homeowners intentionally miss payments to qualify for the loan modification. How risky is this advice?

A: Consumers should be wary of missing payments to qualify for a loan modification. If you skip a mortgage payment, you’ll still owe that amount and additional interest and penalties that can add up fast. Missed payments can harm a consumer’s credit score and make it more difficult to refinance a mortgage, get loans or get credit.    

Advising someone to intentionally miss their mortgage payments raises serious concerns. If anyone advises a homeowner to intentionally miss mortgage payments, I would strongly encourage the homeowner to contact a HUD-certified housing counselor as soon as possible. HUD-certified housing counselors are specially trained to help homeowners. Because they are nonprofit organizations, there is no charge for their services. HUD-certified housing counselors in Hawaii have a good track rec­ord of getting things done, but the sooner you contact them, the better the odds they can help you. Or the homeowner may obtain legal advice from a lawyer who is experienced in this area.

Interested homeowners may contact the Hawaii Foreclosure Information Center (“HFIC”) for information about HUD-certified housing counselors in Hawaii.

The HFIC is operated by the Hawaii Department of Commerce and Consumer Affairs as a free one-stop information center for homeowners. Homeowners may call the HFIC here in Hono­lulu at 587-3222 or toll-free from the neighbor islands at 800-394-1902. You may also access the HFIC online at www.HFIC.hawaii.gov for more information about this important public information program for homeowners. 

Q: Are free or heavily discounted travel packages that consumers are pitched by mail or phone legitimate if there is an upfront fee involved?

A: Legitimate companies won’t ask consumers to pay an upfront fee to claim their free or discounted offer.  Consider making your travel arrangements through licensed travel agents. They will give you more protection from scams and they earn their commissions through the business that you patronize, not you. You can also check free online travel sites. Again, if you’ve never dealt with a company before, check them out first before signing up and paying any fees.