Guide to Credit Counseling
Agencies
Page 2 of 2
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Red Flag
tactics of Disreputable Debt
Negotiation companies:
Guarantee they
can remove your unsecured debt.
Promise that
unsecured debts can be paid off
at 10 to 50 percent of the
balance.
Require
substantial monthly service fees
higher than $50, or a percentage
of the balance.
Demand payment of
a percentage of the amount they
are "saving you".
Tell you to stop
making payments to or
communicating with your
creditors.
Require you to
make monthly payments to them,
rather than with your creditor.
Claim that
creditors never sue consumers for
non-payment of unsecured debt.
promise that
using their system will have no
negative impact on your credit
report.
Claim that they
can remove negative information
from your credit report, even if
it is accurate.
Pressure you to
make what they call
"voluntary
contributions." Reputable
credit counselors present their
fees upfront and are never a
percentage of your debt. (2)
Other Red Flags
include:
Your initial
meeting last less than 30
minutes.
They claim it's
not necessary to come in for a
person to person interview and
can instead conduct it over the
telephone or by internet.
They try to push
you into a DMP without really
evaluation your situation.
Reputable credit counselors offer
other valuable services besides a
DMP and a DMP may not be right
for everyone.
Insists that you
make an immediate decision.
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To avoid getting
involved with a credit counselor that will do you
more harm than good, follow this criteria when
choosing a credit counselor:
Check to see if they are
accredited by the two oldest and most
reputable accredited agencies the
National Foundation for Credit Counseling
(NFCC) and the Association of Independent
Consumer Credit Counseling Agencies
(AICCCA). Members of these organizations
have to go through a thorough
accreditation process guided by
independent third-party organizations
which carefully review the operating
standards and effectiveness of the credit
counselors.
Just because they are
non-profit, doesn't mean you don't have
to pay. However, both the NFCC and AICCCA
have strict guidelines about their fees
which usually cost $50 to $100 to start
an account and around $50 a month to
manage a DMP. Some will waive the fees if
you are financially destitute.
Provide you with monthly
statements showing where your money is
going under a DMP.
No matter the
accreditation, you should still check on
an agency with the Better Business Bureau
and your State Attorney General's office.
Unanswered or unresolved complaints
should be red flags for you to go
elsewhere.
Verbal statements are
backed up in writing and all payments
garner statements and receipts so you can
see where your money is going.
Summary
Credit counseling agencies can
help you get your negative financial situation
under control and on the path toward living debt
free. Despite the invaluable assistance they can
provide to debtors, only half successfully
complete the Debt Management Plan, states the
NFCC. Credit counselors can give you the tools to
succeed, but they can't solve your problems for
you. Debtors have to be focused, committed and
disciplined enough to take the tools credit
counselors give them and use them to pay down
their debts and work their way out of the prison
of debt. Credit counseling is viewed as win-win
for debtors and creditors and the best
alternative to bankruptcy. This viewpoint is
backed by the 2005 Bankruptcy Abuse Prevention
and Consumer Protection Act which requires credit
counseling for debtors 180 days before they can
file a bankruptcy claim.
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Sources:
1. Should I handle my debt
through credit counseling?, By Shirley
Anderson-Porisch, University of Minnesota
Extension Service November 17, 2005
2. Federal Trade Commission
website on Credit. www.ftc.gov/credit
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