credit counselor may advise you on how to use credit wisely; help you establish
a workable budget, keep track of your bills and manage your money; and, if
appropriate for your situation, arrange a repayment plan with your creditors
that may help consumers to avoid bankruptcy and ruining their credit standing.
Consumer credit counselors encourage consumers to make every effort to pay
their debts, and a certified specialist can assist you in planning for your
financial security. The Better Business Bureau offers the following advice on
selecting a credit counseling service that is right for your needs.
If you decide
to work with a credit counseling agency, take time to research your options and
take care to select a reputable agency. Your goal should be to find a credit
counseling agency that has satisfied clients, offers personalized service from
trained counselors, can educate you on how to make appropriate financial
choices and will provide you with the tools you need to achieve financial
- Carefully evaluate advertisements.
Good credit counselors often rely on past clients for referrals instead of
soliciting business through television advertising, infomercials,
telemarketing or spam e-mails.
- Interview several agencies. If you
know someone who has used such an agency in the past, ask for a
- Check complaint records. Contact the
Better Business Bureau, state Attorney General and local consumer
protection agency to find out about specific credit counseling
- Check licensing and accreditation.
Many states require credit counseling organizations to register or obtain
a license. Do not hire an organization that has not fulfilled the
requirements for your state.
- Ask if the counselors are certified
and by whom. Try to select an agency where an outside organization has
certified the counselors. Also ask how the agency's employees are paid.
Avoid organizations that pay employees a commission, which may influence
the number or nature of services they decide you need.
- Make sure services are personalized.
A cookie-cutter approach may not address your specific financial
situation. Look for plans tailored to fit your personal circumstances.
- Determine the agency's privacy and
security policies that are in place to protect your personal information,
and make sure you are comfortable with the terms.
- Gain a clear understanding of the
services offered, including the opportunity to speak with a trained
counselor to develop a personalized plan. Also determine what sort of
services the agency provides regarding debt repayment plans.
- Get verbal promises in writing. Only
do business with agencies that offer formal written agreements or
contracts. Carefully read through the terms of agreement or contract.
- Fees. If there are fees (set-up fee,
monthly service charges, etc.), the agency should explain how much and
what they are based upon. In general, you should not expect to pay more
than $75 in set-up fees or make a monthly payment that exceeds $40. This
monthly payment fee is subject to state law, and the agency representative
should be able to tell you the specific regulations for your state of
- Ask how the agency is funded. Most
credit counseling agencies are partially funded through voluntary
contributions from creditors who participate in Debt Management Plans.
- Look for agencies that will help you
manage your finances by offering educational brochures, counseling and
workshops. If the agency insists that a debt management plan is the only
option for clients, look elsewhere.
repayment or debt management plan (DMP) is a creditor-approved arrangement that
allows you to repay your unsecured debts at reduced interest rates. The credit
counselor will negotiate with creditors to reduce interest rates, eliminate
late fees or other penalties. In turn, you will be expected to make a regular
monthly payment to the credit counseling agency. Instead of writing several
checks to various creditors each month, you make one payment (usually
electronically) to the counseling agency. Your payments are then used to pay
your creditors according to a payment schedule the counselor has developed in
consultation with you.
counseling agencies charge a modest monthly fee for managing the plan; others
charge a more significant fee. Agencies that are members of the National
Foundation for Credit Counseling (NFCC) and the Association of Independent
Consumer Credit Counseling Agencies (AICCA) are bound by standards that limit
the charges for their services. Some states also have strict limitations.
Before enrolling, ask what the cost will be. If the fee is too high or you are
asked for a large "voluntary" contribution, then you may want to
consider selecting another agency.
entering into a contract with a credit counseling agency, evaluate the services
offered carefully. Proceed with caution if the company:
- Demands account numbers or other
financial details before discussing services or fees. Reputable credit
counseling agencies are happy to provide free information upfront about
- Boasts monthly payments can be
lowered by 30 to 50%. This bold statement is rarely, if ever, true.
- Promises getting out of debt will be
easy. Implementing strategies to reduce and control debt are rarely simple
- Promises a "quick fix" to
your financial problems. Avoid any agency that claims it can evaluate your
situation in just minutes, or that offers to do so quickly over the phone.
Experienced counselors may want to spend at least an hour with you
reviewing your financial situation before recommending how to address your
concerns, and may offer additional follow-up sessions.
- Claims negative information, such as
bankruptcy, will be removed from your credit report. It is illegal to make
such a representation if the negative information reflects your true credit
history. Accurate information cannot be removed from a person's credit
- Issues blanket recommendations for a
debt management plan. DMPs are not for everyone.
Do not agree to establish one until you have reviewed your personal
situation with a certified credit counselor who recommends such a plan and
then customizes the plan to best manage your debt.
- Requires "voluntary"
contributions. Required "voluntary" contributions are not
- Is reluctant to provide the
organization's business name and address. This is a clear sign of
impending fraud. A toll-free telephone number or e-mail address is not
sufficient. Scam artists typically avoid providing their physical location
to thwart law enforcement detection.
- Insists you make an immediate decision.
Reputable credit counselors will permit you time
to evaluate their offer, shop around and make a determination that best
suits your financial situation. As you are doing your research, however,
remember that timing is critical when addressing your financial situation.
Delays can cause your circumstances to worsen.
more information, contact:
New York State Attorney General
New York State
Consumer Protection Board
This report is
general in nature and is not intended as a reliability report on any company,
service or product.