Some debt-relief companies make elaborate promises, such as slashing your monthly bill payments, getting you lower interest rates and helping you pay off your accounts more quickly, but MSNBC Consumer Man columnist Herb Weisbaum warns that they could fail to deliver. Legitimate nonprofit credit counseling firms help you create realistic repayment plans for debt relief at little or no cost to you. There are ways to distinguish these reputable companies from scammers who demand high fees and deliver no services.
Locate credit counseling companies in your area that help with debt relief through the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. These professional organizations impose high ethical standards on their members, the Better Business Bureau advises, so only reputable companies join them.
Call several local credit counseling companies and ask whether they offer debt-relief plans, which are also called debt-management plans. Inquire about any fees and ask where the companies get their funding. Reputable nonprofit credit counseling firms are funded mainly by money from creditors, not clients, according to the BBB.
Ask prospective counseling firms if their counselors are trained and accredited by an outside agency. Find out how the counselors are compensated. Reputable companies do not give commissions to their workers for talking you into certain services such as debt-management plans because another solution might be more appropriate for you.
Request a sample contract copy from the firms you are considering. The contracts should disclose all fees and details of the services provided to clients. Legitimate credit counseling firms use written contracts, so do not rely on firms that only give verbal information and promises.
Check the Better Business Bureau rating for the firms that appear reputable and contact the Federal Trade Commission or your state attorney general to see if there are any complaints. Avoid firms that have a history of problems or that are being investigated by state or federal officials.
Tips & Warnings
- Do not insist on a debt-relief program as the solution to your financial problems. Counselors at reputable relief firms are trained to assess your situation and offer all appropriate options. You may be able to get your finances back on track with some money management classes or a revised budget rather than entering into a formal debt-management plan.
- Even reputable debt-relief companies can shut down unexpectedly. Call your creditors immediately if you are in a debt-management plan and the counseling firm that is handling it closes its doors. Ask if you can continue to pay them directly on the same terms negotiated by your credit counselor, the Federal Trade Commission advises.
- MSNBC.com; Debt Relief Deals Preying on Consumer's Trust; Herb Weisbaum; April 2007
- Better Business Bureau; Tips on Choosing a Credit Counseling Agency; June 2009
- Federal Trade Commission; For People on Debt Management Plans, A Must-Do List; December 2005
- Federal Trade Commission; Knee Deep in Debt; February 2011
- Photo Credit Jupiterimages/Photos.com/Getty Images
Legitimate Debt Relief Programs
However, it is even more important to choose a reputable debt relief program to fix your financial situation. Other People Are Reading....
How to Compare Debt Settlement vs. Bankruptcy
Look for reputable debt settlement companies. Companies that charge huge fees up-front are companies to be avoided.