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Credit Counseling and Selecting an Agency  |
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 If you’re in debt, even just a little, there is no shortage of services looking to help you out. You’ve seen the commercials on TV, “Nothing should stand between you and your money,” right?
But what few people seem to know is that there is good, reputable credit counseling and there is bad, predatory credit counseling. When looking for debt help, you need to be able to recognize the difference between nonprofit organizations and for profit organizations.
In addition, no matter which service you choose, you are still responsible to make sure your debt is repaid accurately and on time.
Other factors driving people to seek credit counseling help are the changes to the bankruptcy laws which now require people in bankruptcy to seek credit counseling help.
Regardless of your situation, before you talk to a credit counselor here are some things to know and to ask about credit counseling:
Consult various agencies, media about reliable credit counseling services in your community: If you’re filing bankruptcy, it is generally wise to go with the chosen consumer credit agencies recommended by the trustee. But that doesn’t mean you shouldn’t check them out. Check which agencies your local media consults when talking about credit counseling, and check in with the local Better Business Bureau (BBB) to see if it has obtained complaints on the agency.
Watch carefully for fees and expensive services: A reputable credit counseling agency should send you free information about its policies and activities without asking you at that point to provide any details about your situation. Check the range of services they offer – the best credit counseling agencies provide budget counseling and savings and debt management classes. The FTC says you should avoid organizations that try to push you into a debt management plan (DMP) as your only option before they get a chance to look over your detailed financial situation.
Know how their staff is paid: Understanding compensation is important. If the agency’s staff is paid based on the services they sell, go somewhere else. And if your bankruptcy trustee recommends that agency, let them know so they can be taken off the list.
Understand debt management plans and whether they’re right for you: A debt management plan typically requires you to deposit money each month with the credit counseling organization, and it pays your debts in exchange for a lowering of fees and balances by your lenders. Reputable consumer credit services offer such plans, but since you might be in one for more than two years, you need to understand how they work.
Understand that these organizations can make costly mistakes: We mentioned this before, but if you reach an arrangement to pay future bills through an agency, it is possible they can make a mistake paying your bills on time. You must still monitor due dates on all your outstanding bills and make sure the agency has made the payments on time. Call every one of your creditors each month to confirm they made payment. If they fail, call the BBB to alert them. A credit counseling agency that fails to pay bills on time will delay any recovery of your credit rating.
Make sure all agreements are in writing: You should know in writing what services the agency will provide you, whether you will attend classes and counseling on specific topics. Always know whether you’ll have the opportunity to discuss your situation with a counselor in person. Above all else, understand any charges you are paying.
Information for this article provided by the Financial Planning Association
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