Be Careful with Credit Counselors

There are a large number of companies and individuals that attempt to pass themselves off as credit counselors in order to capitalize on the misfortunes of those who are in severe debt. To help you identify who these unscrupulous entities are, the Federal Trade Commission (FTC) has developed a list of questions that you should ask to determine if a particular credit-counseling agency is reputable. These questions include:

  • What services do you offer? A reputable credit counseling service will offer budget counseling and savings and debt management classes, plus be able to provide you with the services of someone who's trained and certified in consumer credit, money, and debt management. The counseling service should begin by discussing your personal situation with you, help you to develop a personalized plan to solve your immediate money and credit problems, and then teach you how to avoid the recurrence of such problems in the future.
  • Is the credit counselor licensed in my state to provide the services offered? Many states require counselors to obtain a license before they're allowed to offer credit counseling, debt management plans, or other related services to consumers.
  • Does the credit counseling service offer free information? As a consumer who's simply inquiring about working with a credit counselor, you should never be charged for information concerning the services that are offered by a specific company.
  • Will I be required to sign a formal contract or written agreement with the credit counseling company? Never agree to pay for any services over the telephone. You should receive a written contract or agreement before being charged for credit counseling services or participating in a debt management plan coordinated by the credit counseling company.
  • Do you have a good reputation with the Better Business Bureau and my state's Attorney General? You should take a little time to do a background check on the agency or service that you're interested in working with. Determine if there have been any formal complaints filed against the company; you can search for these on the BBB's website. But keep in mind that even if you can't find any filed complaints against a specific company, that's not an absolute guarantee that the organization is reputable.
  • How much will the services cost? Be sure to obtain a detailed price quote in writing and make absolutely certain that all of the fees are listed in the quote. Identify any up-front or starting costs, monthly fees, and other charges for the various services offered by the company.
  • How are your individual credit counselors paid? Are they given a commission based on services that you sign up for? The FTC advises that if the organization won't disclose how it receives compensation from creditors, or how their employees are compensated, you should continue to shop elsewhere.
  • Will the information that I provide to the credit counselor be kept confidential? You should know exactly who would have access to the personal and financial information that you give to the company.

Many companies advertise credit-counseling services. It can be difficult to determine which are reputable and which should be avoided at all costs. One of the best ways to find a reliable and reputable credit counseling service is to contact the National Foundation for Credit Counseling (NFCC) for a referral in your area. Founded in 1951, this entity is the county's largest and longest serving national nonprofit credit counseling organization. Their agencies have trained, certified credit counselors who offer free and low-cost educational information, management advice, and debt reduction services. For more information, please visit their website.

 

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