Debt Consultants

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Debt consultant scams generally involve firms advertising online a legal way to dispose of unmanageable debt, such as mortgage loans and credit card debts via a consumer proposal. Participants are required to pay the debt consultant a service fee ($1,500 to $2,000), along with submitting the loan(s) information, and having the applicant sign a special power of attorney, authorizing the consultant to enter into transactions regarding the title of the applicant’s homes on their behalf.

The consultant then issues bonds and promissory notes to the lenders that purport to legally satisfy the debts of the participant. In the exchange, the participant is then required to pay a certain percentage of the value of the satisfied debts to the subject. However, most debt consultants are not legally authorized to file a consumer proposal; therefore, creditors can still go after the applicant. Only trustees are licensed and regulated by the Canadian Government, as well they are legally obligated to give unbiased information.

The potential risk of identity theft related crimes associated with the debt consultants is extremely high, because their applicants provided all of their personal information to them.

Coping with unmanageable debt is a stressful endeavour; furthermore, individuals looking to be relieved from their debt are not in the financial position to pay for consultant fees. Therefore, Student Destinations recommends the following:

  1. Don’t trust all Non-Profit companies, as Non-Profit does not mean it is a licensed or regulated entity by the Canadian Government.
  2. Any consultant demanding fees upfront before they conduct their services should be avoided.
  3. Speak with your financial planner for advice regarding consumer proposals and other debt elimination strategies.
  4. Review your monthly budget to confirm whether or not you can truly service the debt.
  5. Meet with a licensed trustee that is obligated to give unbiased information. Find out if they are able to give free consultation or recommendations within the initial meetings.