The tough national economic conditions are putting a strain on numerous Georgia households. Many consumers are weighed down by enormous amounts of debt and are struggling just to keep their heads above water. As a result, companies that promise to help you pay off your debt seem to be sprouting up left and right. These "debt adjustment" companies often make grandiose claims about how they will significantly cut consumers' credit card debt and resolve money problems. Yet many of these companies are not reputable, and consumers who trust them with money could end up in even worse financial straits. There are ways to determine whether a particular debt adjustment company is legitimate and whether working with one is worth a consumer's time.

• Credit counseling
Before pursuing debt adjustment, you may want to seek credit counseling. These services, which are often provided by nonprofit companies, help consumers to prepare and maintain workable budgets.  Credit counseling organizations offer advice on managing money and debt, and may provide free educational materials and seminars.  However, their services are not necessarily free, so make sure you understand up front if you are required to pay any fees. The National Foundation for Credit Counseling can help you locate a reputable credit counseling service in your area. You can contact them at 1-800-388-2227 or www.nfcc.org. It's also advisable to check the reputation of the business by seeing whether any complaints have been filed against it with the Better Business Bureau.

• Debt sdjustment
Many credit counseling companies also offer debt adjustment services. Debt adjustment is when a company negotiates directly with your creditors to help reduce your monthly payments by lowering your interest rate and reducing or eliminating certain fees and finance charges. You make payments directly to the debt adjustment company, who in turn distributes the money to your creditors.
But beware:  Fraudulent debt adjustment companies are popping up overnight. They try to collect as many fees as they can, but never distribute any funds to the consumers' creditors. Then they leave the state and set up shop somewhere else, saddling their unfortunate customers with greater debt and a bad credit rating.  

• Debt settlement
Still other companies offer debt settlement services, whereby the company negotiates with your creditors to reduce the amount of debt you owe.  These companies often advise consumers to stop making payments to their creditors until a negotiated settlement has been reached, and to instead make payments to the debt settlement company. This scenario is not only illegal in the state of Georgia, it can often worsen a consumer's money problems. First of all, credit card companies are under no obligation to reduce the amount of debt owed.  So if you have stopped sending them your monthly minimum payments, and no negotiation is reached, your balance will be greater than it was before — thanks to interest and late fees — and your credit rating could be negatively affected.  Again, there are many fraudulent companies who happily accept money from consumers without ever intending to negotiate with creditors.  Consumers should also be aware that if a reduced balance is agreed upon, they may owe taxes on the amount the creditor has forgiven.  If a company charges exorbitant fees for their services or makes promises that sound too good to be true — such as reducing your debt by 50 percent — run, don't walk, in the other direction.
Consumers can avoid being scammed by an unscrupulous debt adjustment company by being aware of two significant laws that debt adjustment companies must follow when operating in the state of Georgia:
1. All funds that debt adjustment companies accept from consumers (minus authorized fees as described below) must be provided to the consumer's creditors within 30 days of receipt from the consumer.  This statutory protection is designed to keep money flowing to creditors, so that consumers will not be assessed late fees and interest, and to protect already vulnerable consumers' credit scores from plummeting further.
2. In exchange for their services, debt adjustment companies cannot charge a consumer more than 7.5 percent of the amount the consumer pays for distribution to his or her creditors. That means, no up-front fees or any other additional fees whatsoever. This provision is aimed at protecting already financially burdened consumers from getting into more debt by outlawing exorbitant fees to companies who are supposed to be getting consumers out of debt.  
If a debt adjustment company does not comply with the above requirements then it is in violation of Georgia law. Any company that violates the above provisions will not only be liable for significant civil monetary fines, but the individuals involved in these companies may be personally charged with a criminal misdemeanor. Consumers also have the right to file private legal actions against debt adjustment companies that have violated the above provisions, which can result in a company refunding all fees paid by consumers plus $5,000. A private attorney can assist in filing such an action on your behalf.
If you learn of a debt adjustment company that is in violation of Georgia law, please contact the Governor's Office of Consumer Affairs at 404-651-8600 or 800-869-1123.