Federal and state regulators are warning consumers that some credit counseling agencies are not what they seem. They may actually be using a non-profit status to avoid consumer protection laws. This gives them the ability to advantage of you, the trusting consumer.
What makes the agency non-profit? All they have to do is provide free education and counseling services. But many agencies are using these as a way to hustle clients into debt-management plans, which pay off big time.
With most debt-management plans, the client pays the agency a certain amount of money each month. The agency then pays the client's bills. The agency negotiates lower interest rates and the waiving of fees with the client's credit cards and loan companies. The credit card companies will usually give the agency a kickback, a percentage of the amount repaid.
Many experts say that clients are often pressured into the plans, even if they don't need them. Some agencies don't pay the bills on time, and you are the one who suffers.
Even the IRS has stiffened its review of agencies seeking non-profit status.
There are legitimate credit counseling agencies out there that can help you with your financial problems. You just have to shop around and do your homework when choosing an agency.
Talk and visit several agencies before selecting one. Don't let the non-profit label fool you into thinking that a certain agency is better than the others. Non-profit status doesn't differentiate the good from the bad, you must do that yourself.
Watch out for agencies that want ?voluntary? contributions and high monthly service charges. If you are having financial problems, chances are that you can't afford to pay high fees. Before you sign up for a debt management plan, request a written statement of all agency fees.
If an agency says that they can get you out of debt quickly or slash all of your interest rates, don't believe it. First, getting out of debt takes time. You are simply looking for a plan that will get you there a little faster ? but it still takes time.
Secondly, interest rates are determined by your credit card companies, not the agency. Many creditors won't lower your rates. Some will. The agency has no idea of knowing what the future holds.
Check with your creditors to make sure that they are willing to work with the agency you choose. Once you have started a payment plan, make sure that your creditors are receiving their payments on time. If they don't, it's your problem.
Ask around for a reputable agency. Check with the Better Business Bureau and your state's attorney generals office to see if there are any complaints on file. Ask the agency if they are a member of the Association of Independent Credit Counseling Agencies or the National Foundation for Credit Counseling ? two well-known groups that have standards and fee limitations.
It's okay to ask for help, but make sure that you can trust who you ask.
Non Profit Credit Counselor
It's important to choose your credit counselor carefully. Here are 5 simple tips that can help:
1. Get personal -- It's always best to choose someone who can give you in-person counseling, rather than advice over email or the telephone. You can often find good credit counseling help at your local banks, colleges, credit unions, military bases, housing authorities, and branches of the U.S. Cooperative Extension Service.
2. Watch out for high fees -- Bad credit counseling services often try to trick clients into paying high fees or "voluntary contributions" which can significantly increase their total debt. No matter what, be sure to get a quote in writing which lists all the setup and monthly fees BEFORE you sign anything. If the fees seem too high, look somewhere else.
3. Check credentials -- Find out if the credit counselor you're thinking about working with is licensed in your state. Look for counselors that are accredited and/or certified by a third-party organization. Make sure the counselors don't get extra compensation for getting clients to opt into high-fee debt management services.
4. Ensure your privacy -- Make sure that your counseling agency has high-level safe-guards in place to protect your private information, such as your address and credit card information. You don't want to become a victim of identity theft!
5. Beware debt management services -- If you need a credit counselor because you're filing for bankruptcy, watch out for any agency that heavily promotes debt management programs. These arrangements are often big scams that can cost you large amounts of money in fees. They also are NOT required by the new bankruptcy laws, despite what some shady credit counseling agencies may try to tell you.
Both Rateempire & Jamie Clark are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Rateempire has sinced written about articles on various topics from Finances, Diamonds and Mortgage. Martin Lukac represents portal that operates consolidation services to get rid of your debt fast. #1 Debt Money also operates an internet consumer banki. Rateempire's top article generates over 18100 views. to your Favourites.
Jamie Clark has sinced written about articles on various topics from Skin Care, Credit Counseling and Lose Weight. Jamie Clark is a researcher and writer for Credit-Counseling-Truth.com. For more useful and bankruptcy information visit. Jamie Clark's top article generates over 40500 views. to your Favourites.
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