A growing number of unregulated debt advisors are offering misleading promises of quick-fix solutions
Amid steadily rising costs and ongoing economic volatility, a new consumer alert issued by the Office of the Superintendent of Bankruptcy (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) is calling on Canadians to be wary of unregulated debt advisors.
Such advisors prey on Canadians who are carrying large debt loads through misleading promises of quick-fix solutions, the organizations said.
“Debt relief scams often target indebted consumers by falsely promising insolvency options like consumer proposals and bankruptcies,” the alert noted.
“Some unlicensed debt advisory firms charge hundreds or even thousands of dollars in unnecessary fees for services they are not licensed to provide and often misrepresent the services they can offer.”
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What are the red flags of a possible debt scam?
Aside from unrealistic promises of eliminating debt, unregulated debt advisors also tend to pressure consumers into make quick decisions without discussing all possible options.
A glaring indicator of fraudulent activity is when the advisor is asking for up-front fees or “referral/administration” fees, or claiming that they can get a “better deal” if they are paid before delivering their services, the notice said.
“They may charge money for services that are not necessary and do not provide debt-relief, leaving you in a worse position financially,” OSB and CAIRP said. “They may claim they can grant you access to more debt-relief options through a referral to a licensed insolvency trustee, sometimes for an additional fee.”
Other notable red flags include the lack of in-person services, and lofty promises that the advisor can negotiate with creditors on your behalf.
“Some debt advisory companies may encourage you to cut ties with your creditors and claim they can be your ‘advocate’ and negotiate on your behalf,” the notice said. “Creditors are not legally bound to deal with them, so you may pay up front fees for this service even if they are unsuccessful in reducing your debt and then you end up further in debt.”