Selecting an Approved Credit Counseling Agency
Credit counseling agencies and credit counselors operate as profit and non-profit and vary in quality, fee amounts and type and quality of counseling and debt management services offered. It is important to note many States do not regulate or licensed credit-counseling agencies. Always fully investigate a credit counseling agency before paying any fees or providing sensitive personal information.
Paying off your debts with a good credit counseling agency will help put you on the fast tract to a life with good credit and free from abuse from collection enforcement. Selecting a bad credit counseling agency may be expensive with large hidden fees and may not improve the terms of your debt at all.
Credit Counselors Approved by the Department of Justice
In most states, APPROVED credit counseling agencies must be registered and licensed with the State Credit Commissioner and the US Department of Justice. These agencies are “approved” to provide credit counseling services and debt repayment plans.
A list of approved credit counseling agencies can be found in your area by contacting the bankruptcy clerk for your district. You can search online at:
List of Approved Credit Counseling Agencies
http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm
What Credit Counseling Services Do You Need?
Every credit situation is unique. Do you prefer to meet face-to-face to review your credit and finances? Do you need help consolidating your debts into one monthly payment? Do you need the help of a credit counseling agency to prevent foreclosure? Are you and Identity Theft victim looking for help from a credit counseling agency that specialized in Identity Theft? Make sure to spend enough time researching the services available from prospective credit counseling agencies.
A list of Credit Counseling Services
Debt and Budget Counseling (In-Person, Online and Phone)
Debt Management Plan Setup
Foreclosure and Reverse Mortgage Counseling
Student Loan Repayment Counseling
Identity Theft Counseling Session
Bankruptcy Filing
Bankruptcy Pre-Filing and Pre-Discharge Counseling
Association Memberships
Reputable credit counseling agencies will have numerous national association memberships in addition to being a approved on a national level by the Justice Department to provide credit counseling. National associations do not have any regulatory authority, provide oversight, prevent abuse practices or regulate fees, although offer a starting point to research and investigate prospective credit counseling agencies.
BBB Better Business Bureau – You can begin to research individual credit counseling agencies by checking the Better Business Bureau. The BBB is a great way to look for complaints, referrals and information about credit counseling agencies. You can determine how long the credit counseling company has been in business using the BBB.
National Foundation for Credit Counselors is an agency that oversees the certification of counselors and requires member agencies to adhere to strict procedural policies. http://www.nfcc.org/
Caution: Being a member of a number of national associations does not mean the credit counseling agency is reputable or better than another. Always fully investigate prospective credit counseling agencies before providing any sensitive information or paying any fees.
For Profit and Non-Profit Credit Counseling Agencies
Credit counseling services operate either as profit or non-profit. Fees are diverse for both profit and non-profit credit counseling services. Both for profit and non-profit charge education fees, counseling session fees and fees to setup and manage a debt management plan. Non-profit credit counseling agencies charge fees in the form of donations for many counseling and credit education courses.
Credit Counseling Fees – Step and Maintenance Fees, “Fair Share” Fees of 15% or More
If you plan to use a credit counseling agency to lower your monthly payments by consolidating your debts with a debt management plan, you will need shop for the most attractive terms. In addition to reviewing debt management setup and maintenance fees, review late and over-the-limit penalties and charges assessed by the credit counseling agency.
Many consumers are unaware of the credit counseling industry standard of a “fair share fee.” When credit counseling agenices contact and negotiate the terms of your debt, a fee is generally charged to the creidtors of 0-15% for managing the debt repayment. Most creditors will report the debt being 100% paid, although they have accepted a lower settlement. Depending on the terms of the debt repayment plan, creditors may report the debt is not being paid as agreed upon as a result of the concessions to the credit counseling agency. Credit counseling agencies typically do not advertise or inform consumers of the fees assessed to creditors.
The largest direct fees for many individuals undergoing credit counseling are debt management plan setup and maintenance fees. Explore the example credit counseling debt management fee example below.
Credit Counseling Fee Comparison
John has $22,000 in debt managed by a credit counseling agency with a $65 setup fee and $35.00 monthly debt management plan maintenance fees.
| Debt Amount | Credit Counseling Setup Fee | Subtotal |
| 22,000 | $65 | $65 |
| Length of Loan | Monthly Maintenance Fee | |
| 60 Months | $35.00 | $2,100 |
| Johns Base Credit Counseling Fees | $2,165 | |
Mary has $22,000 in debt managed by a credit counseling agency with a $25 setup fee and no monthly maintenance fees.
| Debt Amount | Credit Counseling Setup Fee | Subtotal |
| 22,000 | $25 | $25 |
| Length of Loan | Monthly Maintenance Fee | |
| 60 Months | None | $0 |
| Mary’s Base Credit Counseling Fees | $25 | |
Personal Experience Referrals
Using the assistance of a credit counseling agency is become more and more popular to help stop the collection calls, help avoid foreclosure and bankruptcy, lower your monthly payments, lower your interest rates, reduce late fees, charges and penalties and get out of debt. Friends and family that you feel comfortable with talking about financial issues may be able to provide a positive experience with a prospective credit counseling agency.
What to Expect from Credit Counseling
Credit counseling companies can help you settle your debts and repay your creditors. Do not expect a credit counseling agency to eliminate or settle all of your debts for pennies on the dollar. Typically, this is warning sign of a Credit Repair Scam and is also called Debt Settlement Negotiation. Debt settlements are reported to the major credit reporting agencies as a “charge-off” which is negative to your credit report and hurts your credit score.
