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Credit counseling non-profit and for-profit
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Debt levels are at its highest. Multiple reasons can be blamed for it. The stock market has gone for a toss. The economy has not revived for years. Consumers are racking up debt and are in big trouble. There has been tremendous proliferation of credit counseling agencies in the past few years to help people in debt. Consumers need to be very careful in selecting the right credit counseling or debt consolidation company. It is obvious the consumer will be working for long with the credit counseling agency. So it best advised to do adequate research before taking the plunge.
Using PrePaid Cards for Credit Repair
It's getting tougher and tougher to buy anything without plastic these days. Since some people have a bit of trouble, and need credit repair, they turn to their only alternative, which is the pre-paid card. These work just like credit cards for the outside world.
Behind the scenes though things work a little bit differently. With the prepaid card, you're basically practicing good debt m... Read credit counseling article
Credit counseling non-profit and for-profit
Credit unions don't need reminding about the recent rise in consumer bankruptcies. In 2002, 1.5 million consumers filed personal bankruptcy, 249,000 at credit unions. Short of bankruptcy, the poor economy and high debt levels have many consumers suffering credit stress.
One of the big relief valves for consumers with credit problems is under pressure. Credit counseling is taking hits from competitors and critics when consumers need guidance most.
Just 10 years ago, about 200 credit counseling organizations existed in the U.S., roughly 90% affiliated with the National Foundation for Credit Counseling (NFCC), Silver Spring, Md. By 2002, more than 1,000 credit and debt management organizations were operating, most of them independent agencies. (About 150 are members of NFCC, representing 1,300 counseling offices.)
The new wave of credit counseling is reshaping the practice, and not for the better. "It's becoming impossible to tell the good, the bad, and the ugly by the usual means," says Travis Plunkett, legislative director for the Consumer Federation of America (CFA), Washington, D.C. CFA and the National Consumer Law Center (NCLC), in both Boston and Washington, released a report of the credit counseling industry. Among the findings:
* Deceptive practices. Some agencies make consumers' payments late and portray fees as voluntary when they aren't.
* High costs. The report explains, "In an industry that rarely charged for counseling and other services a decade ago, most agencies now charge fees to set up a debt management plan and to maintain it on a monthly basis." Some charge a full month's consolidated payment-as much as hundreds of dollars- just to establish an account. The plan dropout rate is high if consumers can't keep up with payments, so this solution often is a bad bet for consumers-and their creditors.
* Abuse of nonprofit status. Almost all agencies have nonprofit, tax-exempt status. The concern is many of the newcomers maintain close ties to forprofit firms, funneling profits to a few individuals.
* Few options. Traditional credit counseling agencies offered a range of services, including financial counseling, community education, and debt management plans. Many of the new agencies funnel most consumers into debt management plans-even if they won't benefit-because the plans are moneymakers for the agencies.
Traditional credit counseling agencies helped about a third of consumers pay off debt with counseling and a third with debt management plans. They referred the remainder-those with serious problems of gambling and other addictions, domestic problems, and mortgage foreclosures-to social service agencies and to bankruptcy. By contrast, the new credit counseling-high profile, aggressively marketed-steers most clients to debt management plans, where the money is.
The old "fair share" model, in which creditors ponied up 15% of funds recovered under debt management plans to offset counseling expenses, is shrinking or disappearing altogether. Today, because the fair share percentage has diminished sharply, there's no extra to cover basic counseling.
That's a shame, because research shows counseling alone can get many people on the right track. As reported in CUNA & Affiliates' Home & Family Finance Resource Center, a three-year study by the NFCC shows consumers who received financial counseling using the NFCC method reduced their debt and improved their credit profile.
See the full CFA/NCLC report for guidance before referring members to credit counseling. Or, take on the credit counseling role yourself.
SUSAN TIFFANY is director of consumer publishing for CUNA & Affiliates.
Contact Susan Tiffany at 608-231-4026 or at stiffany@cuna.com.
Copyright Credit Union National Association, Inc. Jul 2003
Provided by ProQuest Information and Learning Company. All rights Reserved
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Credit counseling options
The problems of debt and poor personal finance skills affect so many people, they need to get serious about turning their situation around. There are so many tools to work with, that many don't know of all the options.
Every idea must be explored, and every tactic used to rid yourself of the debt hanging over your head.Read through this article to learn of an option for working with your debt to get rid of it.
Also look at the other pages and articles on DebtAttack.com for other ideas you can use.
Many Americans are in debt up to their eyebrows and most don't even know what options are available to help them. They just struggle paycheck to paycheck, make minimum payments and watch with frustration as the interest rates eat all the payment and the debt seems to just grow.
Credit Counseling is one option to help deal with debt problems, but before jumping the gun and signing up with any credit counseling firm do your home work.
Many credit counseling organizations are both legitimate and nonprofit. Some credit counseling organizations charge high fees, others hide their fees and the third groupmay ask for "voluntary" contributions. Third party certification adds an independent unofficial auditing that is helpful.
Look for a wide range of services without bias. If an organization says they have a wide range and then push a particular service such as debt management plan (DMP), then they are biased.
Once you get the information in the mail you need to confirm that the credit counselingorganization is both legitimate and reputable.
You can check their legitimacy by contacting your state Attorney General, local consumerprotection agency, and Better Business Bureau.
Checking their reputation is harder since they deal with confidential information and you cannot ask them for referrals.
Take advantage of their workshops that will also give you an opportunity to check them out in person.
Does your heart skip when the phone rings? Are you afraid to open the mail and get another letter from a debt collector? If so, you are not alone. Many Americans are in debt up to their eyebrows and most don't even know what options are available to help them. They just struggle paycheck to paycheck, make minimum payments and watch with frustration as the interest rates eat all the payment and the debt seems to just grow.
Credit Counseling is one option to help deal with debt problems, but before jumping the gun and signing up with any credit counseling firm do your home work. Many credit counseling organizations are both legitimate and nonprofit. They work with you to solve your debt problems. However, there are also those who may say "nonprofit" and charge fees. And those that are completely illegitimate. Some credit counseling organizations charge high fees, others hide their fees and the third group may ask for "voluntary" contributions. All of these willeat into the payments you need to make to your debt.
Choosing a Credit Counseling Organization Find out if they are willing to send you free information about themselves. You are looking for firms who are willing and open about themselves and their policies. If they hassle you for an appointment or want too many details from you before they send you anything, go elsewhere.
What you want to get from a Credit Counseling Organization, to start with, covers the following:
1- Are they licensed to offer you services in your state?
2- What are their set-up fees?
3- What are their monthly fees?
4- Are there any other fees or contributions required?
5- What are the qualifications of their counselors?
6- Are their counselors accredited and/or certified by an outside organization? If so, by whom? If not, how are they trained? Third party certification adds an independent unofficial auditing that is helpful.
7- How do their counselors get compensated? You want to avoid anything that resembles commission.
8- What assurance do you get that your private information remains confidential and secure?
9- What services do they offer? Debt management is just a part of the debt issue and you may need other services to help you accomplish what you need. Look for a wide range of services without bias. If an organization says they have a wide range and then push a particular service such as debt management plan (DMP), then they are biased. How can they help you with both the immediate debt problem as well as long term plan to help you stay on track?
Will you have a formal written agreement or contract with them? You need everything in writing and you need time to review them before you sign. Consider verbal promises invalid.
Once you get the information in the mail you need to confirm that the credit counselingorganization is both legitimate and reputable. You can check their legitimacy by contacting your state Attorney General, local consumer protection agency, and Better Business Bureau. See if they are licensed and if there are any complaints against them filed by consumers. Remember that a clean record is just a start and does not guarantee service.
Checking their reputation is harder since they deal with confidential information and you cannot ask them for referrals. I understand that asking friends and family could be a little awkward but getting a recommendation from someone who actually has dealt with an organization is one of thebest ways to screen a firm.
Many reputable credit counseling organizations offer free educational materials and workshops. They are in the business of helping you get to the root of your budgeting issues. Take advantage oftheir workshops that will also give you an opportunity to check them out in person.
Your financial institution and your local consumer protection agency could also be good sources of information.
I like what William F. Halsey said about problems. "All problems become smaller if you don't dodge them, but confront them."
May your problems become smaller.
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