Debtors, beware: Not all credit-counseling agencies are honest

[ Bookmark this page! ] [ get HTML Version ]





Debtors, beware: Not all credit-counseling agencies are honest
In the world of television commercials, switching toothpaste brands will improve your love life. Gourmet dog food will transform your cantankerous mutt into an obedient show dog. And with just a phone call, you can free yourself from a mountain of crushing debt.

Real life is much more complicated, particularly where your finances are concerned. Getting out of debt is hard. And if you sign up with an unscrupulous credit-counseling agency, your problems could get worse.

Unfortunately, the number of bad apples in the credit-counseling business is increasing, according to a report by the Consumer Federation of America (CFA) and the National Consumer Law Center (NCLC). That's not surprising, because the potential market is huge. The average household's credit card balance has ballooned to $8,940, up 173% from a decade ago. Many families have fallen behind on their bills because of the slack economy.

Reputable agencies make a sincere effort to help consumers get out of debt. But distinguishing between legitimate agencies and shoddy outfits that gouge and mislead vulnerable consumers is difficult, consumer advocates say.

Although a few states have cracked down on agencies for engaging in allegedly unethical practices, the industry is largely unregulated. That means consumers seeking counseling are on their own. There are, however, steps you can take to protect yourself. Beware of counseling agencies that:

Push you into a debt-management program. In a typical debt-management program, the credit-counseling agency contacts your creditors and tries to negotiate a lower interest rate. You make a single monthly payment to the agency, which pays your creditors. In return, creditors pay the agency a fee based on the amount of your debt the agency recovers.

Some agencies, eager to collect on payments from creditors, pressure clients into signing up for debt-management plans, even when that may not be in the individual's best interest, the CFA says. In some cases, financial counseling courses may be enough to help individuals get a handle on their debt, says Lydia Sermons-Ward, a spokeswoman for the National Foundation for Credit Counseling, an umbrella organization for counseling agencies.

Dodge questions about their fees. Be wary of an agency that says its services are free or that payment is voluntary, says Deanne Loonin, staff attorney for the NCLC. Some agencies claim payments are voluntary, then pressure customers to pay, she says.

The cost of counseling varies among agencies. At NFCC agencies, the cost of setting up a debt-management plan ranges from zero to $50, Sermons-Ward says. Maintenance fees range from $10 to $25 a month. The Association of Independent Consumer Credit Counseling Agencies, another umbrella group, limits setup charges to $75 and maintenance fees to $50 a month. Most members charge less, says Joel Greenberg, a trustee for the group.

Cambridge Credit Counseling charges a fee equal to the first month's payment to creditors, a practice criticized in the CFA report. Cambridge officials counter that customers who stick with the program receive rebates that exceed the amount of the upfront fee. They also argue that the fees pay for services that aren't available at other agencies.

Make sure you understand the cost of the program before signing up. A credit-counseling agency should be able to tell you how much it charges, or at least give you an estimate. Get a quote in writing before you sign any contracts, the CFA recommends.

Skimp on customer service. Consumer advocates recommend using the "20-minute test" to evaluate a counseling agency. An agency that offers you a debt-management plan in less than 20 minutes hasn't spent enough time reviewing your finances, the CFA says. A good counseling session takes at least 30 to 90 minutes.

Consider visiting an agency before signing a contract and request a face-to-face consultation. Ask about the credit counselor's credentials and training.

Promise the moon. In an effort to distinguish themselves from competitors, some counseling agencies have launched extensive marketing campaigns. Many reputable agencies advertise their services. But be leery of ads that claim an agency can help anyone get out of debt, Loonin says. "For some people, the causes of the problem are much more complex than counseling or a debt-management program" will solve, she says.

For example, a debt-management plan won't help you deal with so-called secured debts, such as your mortgage or car loan.

Have a history of complaints. The Better Business Bureau received 1,480 complaints about credit-counseling agencies in 2002, up 467% from 1998. You can check out a company at www.bbb.org

Bookmark this page | Search this site | E-mail to a Friend






Top rated articles for christian credit counseling services
1. Credit counseling program
2. Choosing a non profit consumer credit counseling
3. The tricks and traps of credit consolidation
4. Credit Bureau Reports and Your Credit History
5. Debtors, beware: Not all credit-counseling agencies are honest

Editors picks: christian credit counseling services
6. Credit counseling and its effects - free article
7. Free credit report from credit reporting agencies
8. Personal Finance 101
9. Beware of credit-counseling fraud
10. Try credit counseling software

Premium articles: christian credit counseling services
11. What is Wrong with Credit Counseling?
12. Solving Your Credit Problems
13. Financing Tips
14. How a Credit Consolidator Can Reduce Your Debt
15. Trapped by debt? Free yourself in 7 steps

Related articles: christian credit counseling services
16. Shady credit counseling services may do more harm than good
17. Understanding the Process of Credit Counseling
18. Financial assistance tips
19. Your 3 worst debt consolidation moves
20. Some debt counseling non-profits are just looking to make a buck

Recommended Reading : christian credit counseling services
21. Fair Credit Reporting
22. A credit counselor checklist Protect yourself from scam artists by being selective
23. Financial Planning - Basics
24. Get Out of Debt Free with a Consumer Credit Counseling Service
25. How online credit counseling works

1. What You Should Know About Credit Counseling
2. Free credit report from credit reporting agencies
3. Trusting credit counselors - Ask Your Advocate - Federal Trade Commission
4. How Do a Credit Counseling Services Work?
5. Beware of credit-counseling fraud
1. Loans for debt consolidation finance - Understanding how the process works
2. Bad credit and debt problems - Get help now
3. Credit Card Debt Consolidation Services
4. Home Equity Loan To Combat Bad Credit
5. Learning debt consolidation

Credit Counseling and Debt consolidation services in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,



Debtors, beware: Not all credit-counseling agencies are honest
Debt consolidation services in Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania,

Debt consolidation services in Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington DC, West Virginia, Wisconsin and Wyoming.

Add website or submit URL link of your site to 1000 free directory