Today’s topic continues the discussion from the Nov. 22 column on finding a good credit counseling service to help you with your debts. You are to be congratulated if you have decided to seek credit counseling to get your debts under control.
Here are some pointers to make sure that the credit counseling service with whom you work with is ethical and will legitimately help you pay off your debt. Testimony about credit counseling is a hot item before the Ways and Means Committee on Capital Hill and we expect to hear more about significant abuses in the industry. Watch for breaking news.
– Does the firm belong to the National Foundation for Credit Counseling? Members of the NFCC have not been included in accusations of high salaries to executives, high unexplained fees to clients and lack of educational services to clients. Locally, the Consumer Credit Counseling Service of Northern Colorado and Southeast Wyoming is a NFCC member. They can be reached at 229-0695. A national toll-free number, 1-800-388-2227, puts you in touch with CCCS offices throughout the country,.
– How much will the company charge you for its services?
The top initial set-up fee should be no more than $75.00 plus no more than $50.00 per month for the length of the service. Many services charge sliding-scale fees that are much less. Unethical counseling services charge much higher fees but call them "donations" to get around IRS requirements. One company, AmeriDebt, has been given an unsatisfactory rating by the BBB and is being sued in Missouri and Illinois for alleged fraud.
Credit repair clinics operating in Colorado and other states charge from $250 to $5,000 for illegal services that will not provide relief from credit problems but will cost consumers high sums of money.
– Are only legitimate debts included when establishing a debt repayment plan? Certain debts including student loans, IRS debt and others cannot be negotiated. Some unethical companies include these loans in the total debt repayment plan only for the purpose of charging clients a larger set-up fee based on a percentage of all loans. Ethical counselors may offer the option of including these loans, but it is a choice to help clients pay off their loans in a timely fashion and the monthly fees are low.
– Are the counseling services accredited and the counselors certified? Legitimate counseling services are accredited by the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.
– What does the contract say? Are the services legal and ethical? How long will it take to achieve results? Most experts recommend that the repayment period should last no longer than five years.
– Does the agency put all of its clients on debt repayment plans? Legitimate counseling services work with clients to analyze their finances and then recommend that some of their clients go on debt repayment plans. Others are counseled to handle their own debt problems or referred for bankruptcy protection. Bogus counseling services put all of their clients on debt repayment programs to collect fees from clients and payments from creditors.
– Does the agency make claims they cannot fulfill? Do they promise to erase bankruptcy from your credit report? Do they tell you that they will get you out of debt easily?
– Does the agency have a satisfactory rating with the Better Business Bureau (BBB)? The Fort Collins BBB Web site is www.rockymtn.bbb.org. A link at this site will connect you with the national BBB data base. A satisfactory rating is not a guarantee that the company is legitimate, but an unsatisfactory rating is a sure clue to avoid this company’s services.
– Does the agency recommend education?
This is an IRS requirement for legitimate nonprofit organizations. It is also an important component of the counseling process and provides the know-how for avoiding future debt problems.
by Judy McKenna, Ph.D., CFP, Family Economics Specialist, Colorado State University, Cooperative Extension, firstname.lastname@example.org, 491-5772