Family Finances: When you're desperate, look out for fraud

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At a recent home show, we were grabbed by a debt settlement company salesperson who offered to save us at least 40 percent in our effort to get out of debt -- not that we have any.

Another salesperson hawked a software program that would direct us how best to pay off debt. It works great, the salesperson testified. Upfront cost: $3,500!

Recently, a father and son were arrested for selling allegedly fraudulent "bank guarantees." Cost: $25,000 to $50,000. When the alleged bank guarantee was ready for receipt, another $250,000 to $300,000 was due.

Unfortunately, families experiencing financial hardship often are prime targets for outrageously expensive solutions and outright fraud. When you're concerned about your family, it's easy to feel desperate.

There's a lot you can do yourself -- including negotiating with creditors. Learn about filing for bankruptcy at www.usdoj.gov/ust/. There's no cost to ask your creditor to cut your rate, or to modify your loan. All over the Internet, there are calculators to help you determine the most effective way to pay off debt. One attractive site is www.dinkytown.com. Don't have access to a computer? Consider visiting the library.

If you choose to negotiate with your bank directly, seek a titled officer. You often can find a listing of bank officers at a bank's Web site if you click on the tab that says, "About us." You might get assistance with a foreclosure through the U.S. Department of Housing and Urban Development at 1-800-225-5342, or get help paying off debts through a National Foundation for Credit Counseling office, available at www.nfcc.com or by phoning 1-800-388-2227.

A blemish remains on your credit report for seven years and a bankruptcy, typically, for 10. After that time lapses, you often may simply write the credit bureaus, and ask that the information be removed.

For more information, visit www.annualcreditreport.com.

If you decide to use a debt settlement company, fees should be based only on performance and results, suggests Gerri Detweiler, coauthor with John Ventura and Mary Reed of "Stop Debt Collectors" (Credit.com). Watch for excessive fees, and avoid any that say they can stop creditors from calling or avoid a lawsuit against you. They can't.

Meanwhile, be skeptical of costly "bank guarantees" -- whether they be for loans, deposits or other investments.

So how do you spot a fraud?

You can check with your state banking regulatory agency to make sure you're dealing with a legitimate bank.

Perhaps the most common bank-related frauds involve fraudulent cashier's checks. These checks often carry the name of a legitimate bank or issuing entity. Before cashing any check or money order from someone you don't know, contact the issuer directly and speak with a titled officer. You can find financial institution contact information at the FDIC web site at www.fdic.gov. Click on "Bank Find."

"Discounted U.S. Treasury Securities" and "International Monetary Fund Backed Securities" are examples of official-sounding names of instruments involved in prime bank frauds.

Others have involved trading programs that offer "secret," or "private" investment markets, or offering "above average market returns with below market risk." There may be talk of a "secondary market,

Often promoters claim these instruments are backed by federal entities, such as the U.S. Treasury, Office of the Comptroller of the Currency or the Federal Reserve.

Of course, some instruments, such as bank notes and bonds, are issued legitimately. So it may be tough to tell the difference.

Be suspect of opportunities that are "by invitation only," "available only to a handful of special customers," and "historically reserved for the wealthy elite." Never pay money for anything vague.

There have been numerous Securities and Exchange Commission actions charging promoters of these instruments with multiple violations of federal securities laws.

Nevertheless, these offers still get promoted -- particularly over the Internet.


p>Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Quick Steps to Financial Stability" (Que/Penguin). You can contact them at www.moneycouple.com .


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