7 Red Flags That Signal a Scam
1.They charge upfront fees
Legitimate Licensed Insolvency Trustees in Canada never charge upfront fees — their costs are built into your consumer proposal or bankruptcy payments. In the US, the FTC prohibits debt relief companies from charging before settling a debt. If anyone asks for money before doing any work, walk away.
2.They guarantee specific results
No one can guarantee that creditors will accept a specific deal. Phrases like "We guarantee we'll reduce your debt by 70%" are false promises. Legitimate professionals explain likely outcomes without guarantees.
3.They tell you to stop paying creditors
Some companies instruct you to stop all payments and save money in a separate account. This tanks your credit score, triggers collection calls, and may lead to lawsuits — while the company collects your monthly fees. A legitimate trustee will file a proposal or assignment that legally stops creditor action.
4.They pressure you to act immediately
"This offer expires today" or "We can only help if you sign now" are high-pressure sales tactics. Legitimate debt professionals give you time to consider your options and encourage you to seek independent advice.
5.They won't show you their license
In Canada, only Licensed Insolvency Trustees can administer consumer proposals and bankruptcies. They must be registered with the OSB. Lawyers must be members of their provincial law society. If someone can't provide verifiable credentials, they shouldn't be advising you on debt.
6.They claim to be government-affiliated
"Government debt relief program" and "government-approved debt reduction" are common scam phrases. There is no such government program in Canada or the US. The government licenses professionals (LITs, lawyers) but does not run debt relief services.
7.They contact you first
Unsolicited calls, texts, or emails offering to eliminate your debt are almost always scams. Legitimate professionals don't cold-call people in debt. If you didn't reach out to them, be extremely cautious.
How to Protect Yourself
Verify credentials yourself
Search the OSB register for Licensed Insolvency Trustees. Check provincial law society directories for lawyers. Don't take their word for it.
Get everything in writing
Any legitimate provider will give you a written contract detailing services, fees, and timelines before you commit. Read it carefully.
Ask about all fees
Ask exactly how much you will pay total, what the fees cover, and when they are due. "Our fee is included in your proposal payments" is the correct answer from a trustee.
Get a second opinion
Consult at least two providers before making a decision. Initial consultations with Licensed Insolvency Trustees are free by law in Canada.
Check for complaints
Search the Better Business Bureau, provincial consumer protection websites, and online reviews. Patterns of complaints are a clear warning.
Official Resources
These government and regulatory organizations provide reliable information about debt relief and consumer protection:
Office of the Superintendent of Bankruptcy (OSB)
Regulates and licenses Insolvency Trustees in Canada
CAIRP
Canadian Association of Insolvency and Restructuring Professionals
Consumer Financial Protection Bureau (CFPB)
US consumer financial protection agency
Federal Trade Commission (FTC)
US consumer protection and anti-fraud agency
Frequently Asked Questions
Can a debt relief company charge me upfront fees?
In Canada, Licensed Insolvency Trustees include their fees in your consumer proposal or bankruptcy payments — you never pay upfront. In the US, the FTC's Telemarketing Sales Rule prohibits debt relief companies from charging fees before settling or reducing a debt. Any company demanding upfront payment is a major red flag.
How do I verify if someone is a Licensed Insolvency Trustee?
Search the Office of the Superintendent of Bankruptcy (OSB) public register at ic.gc.ca/bsf-osb. Every licensed trustee in Canada is listed there with their license number, location, and status. If someone claims to be a trustee but isn't on the register, they are not licensed.
Are debt settlement companies legitimate?
Some are, but the industry has significant problems. In Canada, only Licensed Insolvency Trustees can administer legal debt relief processes like consumer proposals. Debt settlement companies operate outside this framework and cannot provide the same legal protections. Always verify credentials and check for complaints before engaging any service.
What should I do if I've been scammed by a debt relief company?
Report the scam to your provincial consumer protection office, the Competition Bureau of Canada, and the Better Business Bureau. If you paid by credit card, contact your card issuer to dispute the charges. Document everything — contracts, emails, payment records — and consult a licensed trustee or lawyer about your options.
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Every provider on MyClearDebt is cross-referenced against official government registers. No exceptions.
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