Finding a Reputable Credit Counseling Agency
What to Look for When you Need Credit Counseling.
Don’t be swayed by the “non-profit” label of some credit counseling agencies. Non-profit is merely a different way of organizing a corporate entity, in reality, it means very little and offers no reassurance whatsoever as to the legitimacy of the organization. Whether your credit counseling agency is for-profit or non-profit is completely irrelevant. According to the IRS, some credit counseling agencies hide behind non-profit status in order to circumvent consumer protection laws. The agency’s reputation, and the scope of services they offer, is what counts.
Secondly, don’t get confused by the many different types of credit assistance agencies out there. A credit counselor is there primarily to counsel you, not to sell you financial instruments or bill-paying services. A counselor should be available to meet with you on a regular basis, and to answer all of your questions as they arise.
A less reputable credit counseling agency only wants your fees, and wants to manage your money on your behalf so they can siphon off more over time. A reputable agency won’t take over complete control over your bill paying, but will instead assist you in the process and educate you on the proper methods of doing so.
Avoid agencies that tell you that you should not contact your creditors at all. Don’t believe claims that they will “take care of everything” for you. When working with a credit counselor, you should be able to, at any time, make contact with any of your creditors. If the counselor discourages or forbids this sort of contact, discontinue your relationship with that counselor.
A good credit counselor is not one that simply takes over your bill paying function. Instead, they will help you to create a plan for getting your financial situation under control, and will help you stick to it. When you cease all contact with your creditors and leave everything in the hands of a third party, you are losing control of your situation, not gaining control over it. A counselor should give you guidance, but you must realize that your financial destiny is in your hands alone.
When you’re looking for a credit counselor, if possible, find one that offers in-person meetings, as opposed to one that will only speak to you over the phone or via e-mail. There are lots of fraudulent credit counselors out there. Fortunately, the U.S. government has some serious oversight over them, and so before signing a contract with one, check with the U.S. Trustee’s office (part of the Department of Justice) to find a list of approved credit counselors. You can obtain this list free of charge, along with other relevant information, at the Trustee’s web site.
When looking for a reputable agency, first ask what sorts of services they offer. Some agencies will ask for fees immediately, before they have provided you with any information—and these should be avoided. Further, find out the details of how their fee structure works, including monthly ongoing fees, as well as initial fee. Your fees should be given to you in writing. Lastly, there are some agencies that exist simply to sell you other services, and their “counselors” are little more than salespeople who are paid on commission. These too, should be avoided.
Credit counseling has taken on greater importance today, since new bankruptcy laws require petitioners to undergo credit counseling as a condition of bankruptcy. Before filing bankruptcy, you must obtain a certificate of completion from the credit counselor, and the bankruptcy court will only accept certificates from agencies that are on the U.S. Trustee’s list. Whether you plan on filing for bankruptcy or not, the U.S. Trustee’s list is a valuable resource that can help you choose a reputable counselor.
Additional resources:
Fiscal Fitness: Chosing a Credit CounselorDebtAdvice.org Website
Association of Consumer Credit Counseling Agencies
National Foundation for Credit Counseling (NFCC)
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