Protect Yourself From Credit Counseling Scams

: Chris Lee Law Firm

  Filed under: Credit Counseling

Credit Counseling Scams

When faced with seemingly endless bills and loads of debt, many people find it hard to develop a plan to regain control over their finances. The best place to start is contacting a credit counseling service to help you evaluate your options for erasing your debt. Credit counseling agencies provide many services that review your financial situation and assist you in finding the plan for managing your debt. However, there are many companies that represent themselves as reputable agencies that take advantage of people needing help. It is important you know what to look for when seeking advice from a qualified credit counseling service.

Important Services To Consider

A reputable credit counseling agency will offer many different services to help you manage your debt. Some of the services include educational courses like credit counseling /debt management courses, which teach you about budgeting and how to use credit wisely. They also offer evaluations of your assets and debt to develop a repayment plan that works within your budget, audit your accounts for you and disperse funds to creditors on your behalf.  Make sure the company you receive services from is willing to review all of these options to determine which best suits your needs and financial situation. For some consumers, attending a debt management course may be all they need to continue with debt reduction strategies; others may require a written repayment plan that has been approved by creditors.

Watch Out For Red Flags

Some credit counseling agencies do not have qualified employees. A reputable agency will staff licensed employees such as certified financial planners, certified public accountants or lawyers.  Be wary of any credit counseling agency that does not offer a variety of services. A company that offers a debt management plan as their only service should send a signal they may not be looking out for your best interest.  Some of these non-reputable companies try to persuade consumers into negotiating with creditors to obtain a debt management plan that may end up having hidden fees that cost you more in the end. Or worse, the debt management plan was never presented to the creditor and your account continues in default, accruing more fees and delinquencies. If you do pursue a debt management plan, make sure you obtain written confirmation from the creditor that the plan has been presented to them and approved. Additionally, make sure that any repayment plan you are considering works for your budget. Do not agree to any plan that you cannot afford to pay for each month.  If you experience any further financial hardships after you agree to a repayment plan, contact the credit counseling agency immediately to review your options.

The most important thing to determine before seeking services from a credit counseling agency is their reputability. Some agencies will request “donations” for services or refuse service if the consumer does not pay their fees. It is important to know that credit counseling agencies are non-profit and must meet strict standards of operation. That National Foundation for Credit Counseling is a non-profit organization that sets the standards for credit counseling agencies and provides a list of 4,000 credit counseling programs that meet these standards. Before seeking counsel from any debt management service, prepare ahead of time by knowing what services you can receive and make sure your company is a qualified agency.

 

Resources:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm

 


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