BBB warns of scams amid rising consumer debt

With a recent survey showing that consumer debt in the Evergreen State is up, the Better Business Bureau (BBB) of Washington is sounding an alarm about shady debt relief and credit repair companies.

Why it matters: The national rate of new credit card delinquencies has surpassed its pre-COVID level, clocking in at 7.2% in the second quarter of this year, and some Americans may be starting to panic as they fall behind on payments, writes Axios' Emily Peck.

• While there are ethical credit and debt assistance companies and apps, there are also some that prey on people in distress, Logan Hickle of BBB Washington told Axios.

By the numbers: In Washington, the average household credit card debt is $8,463, according to WalletHub, which compared all 50 states using consumer finance data available from TransUnion and the Federal Reserve.

• Washington ranked 13th, with over $29 billion in total credit card debt, per WalletHub.
• Experts say a combination of inflation, climbing interest rates and the recent resumption of student loan payments may be stretching consumers' balance sheets.

Zoom out: Nationally, the BBB said it received 12,700 complaints and negative reviews of debt consolidation, debt relief and credit repair companies, with $2.4 million reported lost to related scams between 2020 and 2023.

Zoom in: Among them, 56 complaints were directed at credit repair or debt relief companies based in Washington, and 31 Scam Tracker reports came from Washington residents, said Hickle.

• One Washington woman told BBB she was promised a large increase in her credit score for an upfront $1,500 fee. She paid, only to find there was no improvement in her score.
• A Bremerton resident reported they used a local debt consolidation company and paid regularly until they believed their debt was clear, Hickle said in an email. They then learned the company failed to properly set up payments and that hundreds in late fees were owed.

What to watch: Among the red flags to look for are companies that promise quick fixes, ask for fees upfront, try to gain access to bank information or say they have a special line on loan forgiveness programs, per the BBB.

• Know your rights when it comes to debt collection. There are laws that regulate how companies can collect debt and how they can contact you.
• See if you can help yourself. If you are in default, call debt holders yourself and attempt to negotiate a lower debt payment.
• Be vigilant. Check monthly bank statements to avoid recurring charges from companies.

Be smart: "Debt and credit troubles are solved over several months or even years, not a few days," Hickle said.

What's next: If you suspect you are the subject of fraud or dishonest business practices, report your case at BBB.org and file a scam report.