Consumers Should Shop Around When Looking for Help With Their Debt

As the recession deepens, more people find they need professional help getting out of debt. At the same time, con artists are taking advantage of the situation and preying on borrowers who are seeking help. Unfortunately, says Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies (AICCA), consumer credit counseling is seeing its fair share of "buyer beware" scams. "That's why," he says, "it's imperative that consumers thoroughly research any counselors they are considering before entering into any agreements with them."

How can they tell if a consumer credit agency is reputable? Here are some sure signs:

* Third-party accreditation. Legitimate credit counseling agencies are affiliated with the AICCA or the National Foundation for Credit Counseling (NFCC.) Both organizations require its members to adhere to strict quality, financial and ethical standards. "We're not the only ones," Jones says. "There are other legitimate credit counseling agencies out there, but the AICCA and the NFCC are two good places to start."

* A good record of customer service. Consumers should check with the Better Business Bureau to be sure the agency they are considering is in good standing. Anyone can file a complaint, so what's more relevant is how it was resolved.

* A non-profit. "Just because the agency is nonprofit doesn't guarantee it is legitimate," says Gail Cunningham, spokeswoman for the NFCC, "but it is a step in the right direction."

Reputable Credit Counseling Agencies Offer Range of Financial Services

Borrowers also should consider the services an agency offers and the fees associated with those services. The agency should offer a wide range of services, including budget counseling for those headed toward debt problems, debt counseling for those who need professional help climbing out, and housing counseling for first-time homebuyers and those facing foreclosure.

Some agencies offer counseling over the phone and in person. Some may offer only Internet counseling. "The agency should have the channel that works for you," Cunningham says.

Consumer credit counseling agencies, even those that are non-profit, often charge set-up fees and monthly maintenance fees. Some have membership and application fees as well as other charges. All fees should be clearly stated as well as when those fees are due. Consumers should keep copies of their records and contracts.

The agency should never require consumers to pay for services before they are rendered. "Be wary if an agency tells you its fees are voluntary," Cunningham says. If your case is a true hardship, the agency should agree to waive its fees.

High-Pressure Tactics a Sign that the Agency may be Dubious

Another sign things could be amiss is if the agency applies pressure and insists the client sign up for a debt management plan, Jones says. "Be highly suspicious if someone is trying to rush you into a debt repayment plan," he says.

Consumers should expect their initial session with a credit counselor to last at least an hour. A counselor can't do an adequate job of evaluating the borrower's income, expenses and debt in less time than that, Cunningham says. If the counselor is in a rush, it's another red flag.

True credit counseling agencies will work with consumers regardless of how large or small their debt is. "Be leery of agencies that require a minimum amount of debt to be counseled," Cunningham says.

If the promises the agency makes sound too good to be true, they probably are, Jones says. "You have to be very suspicious about those agencies that advertise the moon." Agencies cannot change a credit rating or erase detrimental information on a credit report. Only the consumers can repair their credit by making payments on time over time.

Consumer Credit Counseling Agencies Can Help Resolve Debt Problems

Lots of credit counseling agencies are legitimate and can help educate and guide consumers so that they regain financial stability. Consumers who do their research can select the right agency to help them get back on their feet.

About the Author:
Beth W. Orenstein is a freelance writer working in Eastern Pennsylvania. She writes for newspapers, lifestyle magazines and trade journals. She specializes in real estate and medical topics. She graduated magna cum laude from Tufts University in Medford, MA., with a degree in English.