The Dallas Morning News reported that the FTC is attempting to promulgate new legislation in response to the unscrupulous practices of some debt relief or credit counseling organizations.  The number of complaints regarding companies that provide debt relief services has steadily increased.  According to the article, some of the reform measures would include:  prohibiting an agency from charging fees before the organization provided any services and from masking themselves as a non-profit organization when they are actually a for profit organization.  The recession and decade high job losses have created an environment where many people are simply desperate for help.  Almost proportional to double digit unemployment rates, the rates of cons and scam artists have increased.  There are some agencies out there which are truly focused on providing quality credit counseling.  Before you sign up for a credit counseling service, review the FTC’s web site and advice on how to spot scam credit counseling services.  For example, a tactic recommended by some services is to create a new identity for yourself by applying for an Employer Identification Number when you are not an employer and then using that identify to generate a new credit history.  The FTC warns that using a fraudulently obtained employer identification number to subsequently obtain a loan on a credit application can be considered fraud.  This is particularly good advice if you are in a situation where you may eventually have to file bankruptcy, since a bankruptcy judge will consider fraudulent activity when deciding to approve, or not to approve, your bankruptcy petition.

Whether you are seeking credit counseling or debt relief assistance, the best advice is to use the smell test… if something doesn’t smell quite right, get more information.  Getting an instant and new credit history might appear to be a good idea in the short run when you feel like your finances are crumbling around you.  However, fraud, even when done through your credit counselor, can still get you into hot water. Depending on the amount of the loan, it is considered a felony offense in some states.  If you are not sure about how to proceed when you receive questionable advice about your debt situation, contact a qualified bankruptcy attorney in your area.  Many will offer free or nominal fee consultations.  They can tell you exactly what the law is and how it will affect other potential decisions.  Don’t gamble your financial future with a scam artist.