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6 Tips to Avoiding Credit Counseling Scams
Credit counseling is a useful service for anyone with problem debt. A good
counseling agency can provide advice regarding money management and
debt consolidation. They can also help arrange a repayment plan with your
creditors to help you get out of debt. A bad agency can charge excessive
fees, pocket money that was intended to pay your bills, and steer you into
greater debt than before. Predatory credit counseling has become a
multibillion dollar industry, and with the recent passage of the Bankruptcy
Abuse and Consumer Protection Act, credit counseling will soon become
mandatory for anyone filing for bankruptcy. How can you avoid becoming a
victim of credit counseling scams? How can you choose a helpful and
reputable credit counselor?
Here are a few tips that can help you avoid becoming a victim of predatory
# Many agencies claim to be nonprofit, but that doesn’t mean they don’t
charge money or work with for-profit companies. Inquire about the fees the
company charges. Is there a setup fee? Monthly payments? Does the
company keep the first payment, or does some of it go towards your debts?
Fees should fall within your ability to pay, and any agency that is trying to
help you will know this. A company that charges hundreds or thousands of
dollars in setup fees is probably not interested in anything other than your
# Ask the counselor how he or she is compensated. A salary or hourly wage
is a good answer, but you should be suspicious if they are on commission or
earn incentives by steering you towards expensive debt consolidation
programs. A good counselor should direct you towards solutions that help
you, not solutions that earn them more money.
# Will your creditors work with this agency? Call your creditors directly and
ask them if they will negotiate with the specific agency you’re seeing.
Counselors often state that they can get your creditors to lower fees,
restructure debt or lower interest rates. Can they? Call the creditors yourself
to be sure.
# Make sure that you get all of the counselors promises and terms in writing.
Anything that he or she tells you verbally isn’t binding, so don’t believe it if it
isn’t written down.
# Make sure your agency provides you with monthly reports that state how
much you have paid them and who is receiving the payments. Don’t take
them at their word that your bills are being paid; verify it.
# Check with your local Chamber of Commerce or Better Business Bureau to
make sure that there are no outstanding complaints against this agency. The
counseling business is full of fraud, and complaints are common. It’s smart to
By taking your time, asking the right questions, and doing proper research,
you should be able to find a helpful and reputable credit counselor who can
help you reduce or eliminate your debts. Thousands of Americans are
victimized each year by predatory counseling firms, but there’s no reason why
you should become a victim of one. If you have problem debt, you have
trouble enough already without looking for more.
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including End-Your-Debt.
com, a site devoted to establishing credit, debt consolidation and credit
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