Credit Counseling
How to Choose a Credit Counseling Agency
The Federal Trade Commission and Internal
Revenue Service issued a consumer alert warning to be cautious in choosing a credit
counselor. Consolidated applauds the IRS, FTC, and state regulator efforts to bring
attention to unscrupulous practices in the credit counseling industry. Consolidated
has been a fervent proponent of instituting regulation in the credit counseling
industry at both the state and federal level. It is our hope that such regulations
would improve the level of service consumers receive, set standardized fees, and
devise new ways to increase the effectiveness of debt management programs.
Many credit counseling organizations provide valuable
advice, education and assistance, but consumers need to be wary of the "quick fixes"
offered by some organizations. Consumers can help protect themselves from deceptive
credit counseling practices by knowing how to choose a credit counselor. If you
are having a difficult time repaying your debts, a counseling agency may be able
to work out a Debt Management Plan for you.
Credit counseling agencies negotiate special programs with creditors that are not
available to the general public. Choosing an honest reputable credit counseling
agency can be one of the most important personal finance decisions of your life.
Use the following as a guideline to help you choose wisely.
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A certified counselor will do your budget, including your expenses and income.
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They will figure out the total amount of debt you owe and arrive at a figure you
can pay each month toward that debt while satisfying your creditors' requirements.
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Once all parties agree on the monthly amount required to liquidate your debts, you
send that amount to the counseling agency each month. They distribute the funds
to your creditors, who have agreed to accept a lower interest rate (and perhaps
a lower monthly payment).
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The greatest savings you will see by using a credit counseling agency is that they
can get creditors to lower or eliminate interest as well as other finance charges,
late payments, and other penalties.
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Ask specific questions concerning repayment plans, such as what happens if repayment
is more than you can afford and how secure is the information they provide.
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Since most non-profit counseling agencies have to charge a start-up and monthly
maintenance fee, find out up front what the cost will be and make sure they put
it in writing. Carefully read through any written agreement that a credit counseling
organization offers. It should describe the services to be performed; the payment
terms for these services, how long it may take to achieve results; any guarantees
offered; and the organization's business name and address.
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When selecting a credit counseling agency, check with the Better Business Bureau
to find out if consumers have filed complaints about the provider you are considering.
Most importantly, find out if the issues have been resolved.
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Make sure to use a non-profit organization. A non-profit status alone does not insure
that the organization will do a good job, but coupled with fair fees and educational
material, it is a good indication of a reliable organization. A good place to start
is the Association of Independent Consumer Credit Counseling Agencies.
www.AICCCA.org.
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Remember that credit counseling agencies cannot erase your credit history. If an
agency claims to be able to do so, do not work with them. Under the Fair Credit
Reporting Act, accurate information about your accounts can stay on your credit
report for up to seven years.
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Find out what other sources of funding they receive, who regulates and audits their
operation, if they are certified by the International Standard of Operations (ISO
compliant), if their counselors are certified and by which association, and if there
is a formal written agreement.
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Ask if you will continue to receive statements from your creditors showing what
interest rates you are paying and the reduction of your debt each month.
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Make sure that your creditors are willing to work with the agency you choose. If
they are, follow up with those creditors regularly to make sure your debt is being
paid off.
Receive a personalized
Free Budget & Debt Analysis now and take your first step towards achieving
freedom from debt.
