Choosing a Debt / Credit Counselor
Debt and/or credit counselors offer an important service to consumers
swamped with debt. Consumers who have a difficult time staying within
a budget may simply need a financial counselor's help to examine spending
habits and how to follow sound budget advice. Other consumers may have
suffered a major setback, such as a job loss, and need a debt-management
programs (DMP), which is a plan a financial counselor puts in place to
lower and eventually eliminate a consumer's debt. A reputable debt counselor
will carefully examine a consumer's debt situation and suggest the best
plan of action, but a caveat is in order.
All debt counselors are not created equal. The quality of counseling
services may vary considerably from one counselor to the next. Additionally,
the industry presently has no federal licensing requirements and only
17 states have laws regulating them (the Division of Financial Institutions oversees debt management services in Illinois.
People who have received unprofessional credit counseling services complain
that
- they owe more debt after
the counselor's services
- bankruptcy was the best
option for their financial situation, but they were steered into a debt-management
program
- the counseling agency did
not make sure creditor payments were sent within the billing cycle,
so consumers received late fees
- in some cases, the credit
counselor took consumer money but did not pay creditors at all
Consumers should also be aware that credit counseling agencies were set
up for the benefit of both consumers and the credit industry, so credit
counseling agencies can be properly viewed as a more friendly collection
agency. Creditors pay credit counselors a percentage of the money recovered
from consumers so there is a strong financial tie.
The system, nonetheless, benefits everyone when consumers are offered
sound advice and professional services to help them get out of debt. Bottom
line: a good credit counselor will help solve one's financial problems.
This is how to sort the professional agencies from the unprofessional
agencies.
Do some homework
First, locate some of the nearest non-profit credit
counselors.
The Department of Financial Institutions. Call 312-814-5145 (Chicago)
or 217-782-3704 (Springfield) or go to its web site here.
Locate the nearest member agency of the National Foundation for Credit
Counseling (NFCC) at http://www.debtadvice.org/takethefirststep/locator.html.
Locate the nearest member agency of the Association of Independent Consumer
Credit Counseling Agencies (AICCCA) at http://www.aiccca.org/find.html.
Second, check the complaint records of local non-profit
credit counselors to determine if you want their services.
Better Business Bureau
Call or go to its web site: www.bbb.org
Illinois Attorney General's Office
Call 1-800-386-5438 (Chicago) or 1-800-243-0618 (Springfield) or go to
its web site at http://www.ag.state.il.us/.
Good Questions to ask the Credit Counseling Agency before you
receive its services
- Will the agency refund fees
if the services received are not satisfactory?
- How much training do counselors
at the agency receive?
- Is the agency accredited
by a trade association such as the National Federation for Credit Counseling
(NFCC) or the Association of Independent Consumer Credit Counseling
Agencies (AICCCA)?
- Does the agency have an
independent board of directors?
- Does the agency keep clients
funds in a trust account, separate from its operating funds?
- How long has the agency
been doing business in this area?
- What types of services
does the agency offer?
- How long will it take to
complete a debt-management program (DMP)?
- What effect will working
with a counselor have on my credit rating?
- Are agency services confidential?
The two largest Credit Counseling Trade Associations
The National Foundation for Credit Counseling (NFCC).
http://www.nfcc.org/
Association of Independent Consumer Credit Counseling Agencies (AICCCA).
http://www.aiccca.org/
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