Fraud In The Consumer Counseling Credit Service Industry

A good and reputable consumer counseling credit service can help you get control of your finances and help you to set up a repayment program with your creditors. In addition, they can also teach you better money management techniques and how to better my budget your income and expenses. However, some credit counseling services take advantage of people who are in financial trouble; therefore, you should always use caution when choosing a consumer credit counseling service.

The Law and Consumer Credit Counseling Services

The Federal Trade Commission prohibits unfair or deceptive acts or practices by credit repair and counseling services. Furthermore, many states also have laws that make it illegal for credit service organizations to be able to claim to improve your credit rating or help you avoid paying legal and legitimate debts. Furthermore, many states require that credit counseling services register with the state's attorney general's office and get a surety bond before they can do business. Therefore, you should always check with your state's attorney general to make sure that a credit counseling service is registered and allowed to do business in your state.

Certification and Accreditation

Another good way to avoid being defrauded by unscrupulous consumer credit counseling services is to check with the National Foundation for Credit Counseling, or the in NFCC, the NFCC is an independent nonprofit organization that sets voluntary standards for all credit counseling agencies and services. The NFCC Council on Accreditation currently has over 4000 credit counseling programs that meet NFCC standards.

For consumer credit counseling services service to be accredited by the NFCC, the credit counseling agency must be a recognized nonprofit organization by the Internal Revenue Service and have all the proper local and state business licenses. Furthermore, to earn a NFCC certification, the counseling service must also develop practices that protect consumers.

Some of the requirements to protect the consumer are: audits of operating and trust accounts on a yearly basis, offering consumer education programs, and dispersing funds to creditors at least twice a month - or sooner in emergencies. Furthermore accredited organizations are required to provide the consumer with a financial statement at least once every three months.

Warning Signs

When dealing with a less than reputable consumer credit counseling service, there are a few signs that you should always check for. For example, watch out for illegal fees that will sometimes be disguised as contributions. Also, if setup fees or monthly fees are very high they will negate any gains that you make against reduced interest rates or lowering account principles. In most cases, the setup fee should never exceed $75 and the maximum monthly service fee should not be more than $50. If the credit consumer credit counseling service attempts to charge you more, make sure that you get a detailed explanation for the increase in writing and make sure that you understand why you're being charged more. However, in most cases it is better to simply search for another consumer credit counseling service.

Another thing to watch out for is outrageous claims to be able to quickly repair your credit. Repairing your credit profile takes time; furthermore, it is highly illegal to attempt to create a new credit profile. Some fraudulent agencies will tell you otherwise and tell you that it's easy to create a new credit profile. If an agency suggests this, stay away from them and report them to your state's attorney general.

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