Are you knee-deep in debt? Are you having troubles paying your bills? Are you worried about providing for your family? Are creditors and debt collectors constantly contacting you? Are you worried about losing your home? If so, take comfort in the fact that you are not alone, that everyone at some point experiences financial difficulties, and that there is help available.
Nobody is immune from the financial crisises and unexpected circumstances of life. Debt can mount quickly due to unemployment, medical bills, unfortunate events, and even from overspending and mis-management of money. And as much as saving, budgeting, or cutting back expenses can help, sometimes it is inevitable (and recommended) to get professional help and counseling from a reputable credit counseling agency.
Never forget that running from your debt collectors is never the right solution, bankruptcy is not your only option, and debt negotiation and/or consolidation is absolutely possible. If you have tried to create a budget in the past and failed, if you can’t work out a repayment plan or loan modification plan with your creditors, or continually have trouble paying your bills, you should consider working with a credit counseling organization.
Remember that there is nothing wrong with getting professional help from a consumer credit counseling agency to help develop a plan to eliminate your debt; however, before doing so, ensure that you know these tips & traps:
1. Choose a Reputable Firm
Do your research! Just because a company is listed on the first page of Google should not suggest they are a reputable company. Look into whether or not the company is affiliated with the National Foundation for Credit Counseling (or NFCC), which is committed to monitoring/enforcing ethical credit counseling at a fair cost to consumers. In addition, look into whether they are accredited by professional organizations like the Council on Accreditation (COA). Be cautious of firms that require exorbitant charges and fees. The last thing you need is to go further into debt by partnering with a company who won’t truly help your financial situation.
2. Non-Profit Does NOT Equal Trusted
You must understand that just because a firm classifies themselves as a non-profit does not necessarily mean the organization is legitimate, or that they won’t charge unfair prices. In fact, be aware that several firms who label themselves as ‘non-profit credit counseling agencies’ are more interested in the bottom line than in helping their clients. If possible, look at those on the firm’s board to see whether they are paid by the agency, employees, family or friends; which if this is the case, they will have a financial interest in the company.
3. Better Business Bureau
Check with your BBB, or your State’s Attorney General’s office to see if any considerable amounts of complaints or law suits have been filed against the company.
4. Know the Costs
First and foremost, you should not be charged a fee prior to any services being provided. You want to work with an agency that is open and honest about their fees (be it set-up fees, monthly fees, or % fees). Some companies out there will actually keep your first payment as a fee, rather than applying it towards principle/interest of your debts (avoid such companies). Your monthly payments should be going toward the repayment of your debts, not into the agency’s bank account. Lastly, does the company charge extra fees for phone consultations, educational courses provided, or any other added-value service? Know the costs!
5. Ask Questions
When determining who to work with, ask these types of questions:
- What services does your company/agency offer?
- Is there a minimum amount of debt required for me to work with you?
- Are you available via phone, email, and/or in person?
- Will your agency work with each of my creditors?
- What typically transpires during one of our counseling sessions? And
- Is your agency bonded, licensed, and/or insured?
- Are your counselors paid on commission?
- Ask if this credit counseling will be reported to the credit bureaus (if how long and how often will they occur? so, it will impact your credit score /ability to get loans in the future).
- Do they offer any added services like budgeting classes, tips on speaking with creditors, managing finances, etc.
6. Debt Management Plans
Credit counseling agencies often recommend and help you develop a debt management plan (DMP). Before signing up for, or paying for such a service, sit down with a counselor and review your financial situation and obtain their professional advice before they charge you. Perhaps all you need is help establishing a budget, learn how to pay bills, and finance 101 money management skills. Thus, the cost of a DMP may not be necessary. If, however, you determine that a DMP plan is appropriate, understand that the counseling agency will help negotiate payments and interest with your creditors, often consolidate all debts (credit cards, student loans, mortgage, etc.) into one monthly payment, collect the monthly payment and a monthly fee, and help pay off your debts (usually consisting of a 36-60 month plan) according to a payment schedule pertinent to your circumstance.
Be wary of companies that:
- Try to enroll you in a DMP without taking the time to meet with you and get a clear picture of your financial situation.
- Promises that each of your creditors will work with the agency with their proposed DMP.
- Offers you a DMP first before explaining other options (such as: budgeting courses, financial management education, etc.)
- Keep the first payment as a fee, rather than applying it to
7. Finding Credit Counseling Services:
I would recommend these two websites:
I would also recommend working with an organization that allows in-person counseling at a local office, rather than just over the phone or internet. You can also ask your local financial institution, university, military base, consumer protection agency, or credit union for recommendations for legitimate credit counseling agencies.
8. If You Are a Victim
If you have contacted and/or worked with a credit counseling agency and feel you have been a victim of fraud, there are resources available to help you. You can contact the U.S. Trustee Program or the Federal Trade Commission (FTC) by mail, email, or phone:
MAIL: U.S. Trustees
Credit Counseling and Debtor Education Unit
20 Massachusetts Avenue, N.W., Suite 8000
Washington, D.C., 20530
EMAIL: USTCCDEComplaintHelp@usdoj.gov
PHONE: FTC Toll-Free Numbers: 1-877-FTC-HELP (1-877-382-4357) or TTY Toll Free: 1-866-653-4261
9. Additional Resources
To learn more, visit: http://ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm
Rest assured that legitimate and professional credit counseling agencies do exist, and their services are extremely beneficial if you are in a difficult financial situation. If you choose the right agency, they can help educate you about money management, develop a budget, assist in eliminating debt, and help manage the entire process.
