Debt Counseling Dangers
In the past few years there have been a dramatic increase in consumer complaints about debt management companies. If you’ve decided you need help to get your financial matters in order, make certain you’re placing your trust in the right people. The two common problem areas are excessive fees and questionable debt management behavior.
Most debt counseling organizations are non-profit agencies that work closely with credit card companies. They collaborate to arrive at payment plans that ensure that debtors pay as much of their money back as is realistic, without driving the client into financial peril. Typically the agency develops a plan that pays off consumer debt over a foreseeable period of time and benefits financially by receiving a percentage of the monthly payouts.
While some agencies charge a nominal fee for their services and provide additional counseling services, others incorporate excessive fees into their plans or charge an upfront cost that actually places clients in even deeper financial difficulty. It’s also important to be practical in the early stages of the conversation. In truth, some consumers are in such bad shape financially, that virtually no plan will save them. Be very cautious when you run the numbers. If the plan being proposed seems unrealistic, it probably is. Remember that the agencies make their money by getting prospects into programs. Unfortunately some try to do so even if it isn’t in clients’ best interests.
In addition to doing your own background checks and asking for references, another good indicator of a credible firm is its affiliation with a leading accredited organization, such as the National Foundation of Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA). Bankrate.com has a good collection of tips to consider before you head down the path of credit counseling and debt consolidation firms here.