Credit Card Counseling

If you are struggling financially you don’t need an unscrupulous credit counseling agency to take your money and either disappear or do further damage to your credit.

Understand that there are legitimate agencies out there and an equal number of disreputable ones. Sometimes the names are very similar so make sure you really know who you are dealing with. If you are looking into credit counseling, look around and ask questions. Make sure you verify their credentials and claims.

A legitimate agency is truly interested in helping you and won’t be asking for large, upfront payments for their services. Here are a few things you can verify to make sure you are dealing with a reputable company.

Affiliations

Make sure the credit card counseling service agency is affiliated with a national governing body like the National Foundation For Credit Counseling. These agencies have strict ethical and financial standards for membership. The affiliates have to submit to annual audits and will provide written action plans to each consumer. Consumers should receive statements on their progress and account at least quarterly.

Accreditation

You don’t want a company that is accredited or checked out by itself. There should be a reputable third party that watches what the agency does. One third party accrediting organization is Council on Accreditation (COA).

501(c)(3)

Check to see if the agency is a nonprofit community organization. If they are, they will have the 501(c)(3) filing to show for it. It doesn’t mean they are truly legitimate, but it along with accreditation and affiliation it offers further proof that they are working for you and not for profit.

Services

The credit counseling service agency should offer a wide-range of services that include budget counseling for those who aren’t in debt and debt counseling for those who need assistance. They might also offer counseling services for those who want to buy a home, or reverse mortgage counseling for the elderly. There might be options for those who need to prevent foreclosure or are considering bankruptcy. Some might offer counseling on repairing credit.

Fees

This is an important part of determining if the credit counseling service is reliable. They should tell you in the beginning what their fees are and no fee should be assessed before the services are provided.

If there is set-up or monthly fees, they should be reasonable. One of the national organizations defines reasonable as $50 or less for set-up and $25 or less for monthly fees. Agencies may waive all fees in cases of true hardship and it is right to be wary of anyone who says their fees are voluntary.

Certification

Make sure your counselor is a Certified Consumer Credit Counselor. Certification is provided by the National Foundation of Credit Counseling. This means they’ve passed tests that measure individual financial knowledge.

Education

Check to see if the agency you are considering offers in person classes or workshops. Are there online tools you can use to update your budget or learn about re-establishing credit? Are these classes and tools offered for little to no charge? A legitimate company should be offering education classes to the general public.

No Limits

A legitimate agency will work with all of your creditors, regardless if the companies will pay them or not. They should also work with you no matter the level of your debt, there should be no minimum requirement.

Options

You should have several options for counseling. These options should include in-person, over the phone and online options. They should offer tools that include a debt management plan, and also provide personalized options that are based on your circumstances. Maybe all you need is budget counseling and assistance making a few phone calls.

Payments

Counselors should not be paid a commission type plan based on how many debt management plans they write. The Board of Directors shouldn’t be paid by the agency, they should be volunteers. And your first payment should go to your creditors and not be considered a donation to the agency. Make sure and ask. Also check to ensure that your full monthly payment goes to your creditors and that a portion of it isn’t kept by the agency. You also need written evidence that the company is bonded or insured sot that your payments are protected from the agencies own financial difficulties

Time

Your first appointment really should take at least an hour. There is no way that a legitimate agency can understand your financial situation in just a few minutes even if they’ve reviewed your information ahead of time.

You also want to know how long it will take the agency to start paying your creditors after you make a monthly payment. The success of any debt management plan is dependent on timely and consistent payments.

Last Step

Check with the Better Business Bureau and see if there are unresolved complaints about the agency you are looking into. There may be complaints, because anyone can file one, the important factor is if the complaints have been resolved.

Once you’ve done your research and picked a reputable credit card counseling service you may find you have some questions about the services.

Not all counseling services work the same way. Their services will differ and the way they handle their customers will also vary. Below you will find some general questions and answers that are intended to give you very broad guidelines that will help you verify how your company does things.

How are credit counseling sessions handled?

Depending on the size and focus of the organization, you should have at least a couple of options for the first credit counseling session. Generally you will make a call or go online to schedule an appointment. At this time most organizations will provide you with a list of information and financial documents that you will need to gather for your first appointment.

This information should be focused on your income, bills and living expenses. They will want to see any letters or statements from collectors and will need to be able to understand your total financial situation, not just information on the bills you are seeking help with.

Depending on the company, you may be able to schedule your appointment in person, on the telephone, online or by mail. In person you will take the requested information to the office and meet the agent face to face. A telephone interview, online interview or working with a company through the mail would require you to get the information to the counselor by fax, mail, or via the internet site.

What happens at in the counseling session?

In the session you will talk to your counselor about your situation. The counselor will review the documents and information you have gathered that detail your income and bills. They are professional and non-judgmental. The counselor will help you come up with a spending plan so that you can cover your living expenses and make payments to creditors.

Is the credit counseling confidential?

Yes. Credit counseling should always be confidential. Your financial situation will not be discussed with creditors, just the amount and frequency of offered payments. Ask where the records are kept, client records should be maintained in secure facilities.

How are agencies funded and what will I have to pay for credit card counseling?

This varies greatly between the agencies and is a very important question to ask. Some companies receive voluntary contributions from creditors. These are the credit card companies and collection agencies you owe money to. They also may get money from local grants from foundations and private sources, and some charge specific client fees or percentages. The amount you will be charged is sometimes restricted by state laws. There are companies that charge a very low fee or even no fee for their services.

If the company you are getting counseling from wants to charge a large upfront fee, look somewhere else for help. There are plenty of no or low fee organizations out there that are dedicated to helping consumers. You want a Certified Consumer Credit Counselor that is vetted by the National Foundation for Credit Counseling

Will I still get calls from creditors and collection agencies?

Working with a credit counselor usually means that they will handle these calls for you. Check with your counselor about what to do if a collection agency or creditor calls you. Generally you will inform the caller that you are working with X agency, and here is the number and counselor to call. That should be the end of it. There are very specific guidelines for what a creditor or collection agency can say or do when they are attempting to collect a debt. They can only call during certain hours of the day and should never make threats. Speak to your counselor about your consumer rights if you feel you are being harassed. Your counselor should know the rules and what to do in these types of cases.

Should I tell my creditors I have an appointment with a credit counseling service?

Yes. Make sure that you give them a telephone number and name of the counselor if you know it, the general number of where you made the appointment if you don’t. The creditor may call and verify the appointment. Be very firm that you will not be making payment arrangements or promises until you meet with your credit counselor.

Can I try to negotiate with my creditors on my own?

Certainly. This may be a good choice if you only have two or three cards and are only behind a couple of payments. Make sure that you have figured out exactly what you can pay and when for the next year.

The advantage to working with a credit card counselor is that creditors know that the counselor has reviewed your financial situation and is offering what you really can pay versus what you want to pay. The payment schedule and amount are realistic reflections of your ability to pay them back.