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Credit Counseling

Credit Counseling
Posted on June 7, 2017 by CHS

If you are living paycheck to paycheck, strapped with large amounts of debt, or cannot manage to put anything aside for retirement, you may want to consider seeking advice from a credit counselor. Credit counselors can offer a range of services to help their clients achieve greater financial security. Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. They discuss your entire financial situation with you, and help you develop a personalized plan to deal with your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Most reputable credit counselors are non-profit and offer services at local offices, online, or on the phone. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs. Your financial institution or local consumer protection agency may also be good sources of information and referrals. Not all credit counselors are created equal. When choosing a credit counselor, make sure that they are accredited with one of these national nonprofit organizations:

  • National Foundation for Credit Counseling (NFCC): the NFCC offers the following services through its member agencies:
    • Credit and debt counseling
    • Housing counseling
    • Reverse mortgage counseling
    • Student loan debt counseling
    • Debt management plans and programs
    • Credit report reviews
    • Financial education
    • The majority of services are provided at low or no cost to the consumer
    • One-on-one services are provided in person, online, or by phone
  • Financial Counseling Association of America (FCAA): The FCAA is a member-supported national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services. See the FCAA website to find an accredited counseling agency in your state.

The Federal Trade Commission: The Federal Trade Commission also offers consumer advice on credit counseling services and choosing a reputable counseling agency:

  • But be aware that “non-profit” status doesn’t guarantee that services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which they made hide; others might urge their clients to make "voluntary" contributions that can cause more debt.
  • A reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If a firm doesn't do that, consider it a red flag and go elsewhere for help.
  • Once you've got a list of counseling agencies you might do business with, check each one out with your state Attorney General and local consumer protection agency. They can tell you if consumers have filed complaints about any one of them. (If there are no complaints about them, don't consider it a guarantee that they're legitimate.)
  • The United States Trustee Program also keeps a list of credit counseling agencies approved to provide pre-bankruptcy counseling. After you've done your background investigation, you will want to  interview the final "candidates."

Questions to Ask Potential Credit Counselors: Here are some questions to ask to help you find the best counselor for you.

  • What services do you offer? Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan (DMP) as your only option before they spend a significant amount of time analyzing your financial situation.
  • Do you offer information? Are educational materials available for free? Avoid organizations that charge for information.
  • In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
  • What are your fees? Are there set-up and/or monthly fees? Get a specific price quote in writing.
  • What if I can't afford to pay your fees or make contributions? If an organization won't help you because you can't afford to pay, look elsewhere for help.
  • Will I have a formal written agreement or contract with you? Don't sign anything without reading it first. Make sure all verbal promises are in writing.
  • Are you licensed to offer your services in my state?
  • What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, by whom? If not, how are they trained? Try to use an organization whose counselors are trained by a non-affiliated party.
  • What assurance do I have that information about me (including my address, phone number, and financial information) will be kept confidential and secure?
  • How are your employees paid? Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization? If the answer is yes, consider it a red flag and go elsewhere for help.

See more advice on choosing a credit counselor and debt management plans at the Federal Trade Commission’s website: https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor

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