Guideline to Select The Right Credit Counseling Organization | The ...

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Just about any consumer in America who happens to be feeling that they are in way over their heads with respect to their financial affairs, especially when trying to make their budget work without adequate cash flow to support it, has more than likely given the idea of credit counseling some serious consideration. Just spending a brief amount of idle time with a search engine will toss back an astonishing array, hundreds in fact, of companies, agencies, and organizations offering an interesting spectrum of credit counseling services.

On face value, or judging by their marketing hype on each website, most of these firms appear to be at least somewhat committed to assisting potential clients in resolving their economic difficulties. On balance, there is also a fair amount of negative accounts from various media venues and consumer advocacy groups that indicate the industry?s reputation is certainly plagued by companies with less-than-ethical intentions and performance ratings, that charge their unsuspecting clients excessive fees, while offering questionable advice and generally unfulfilled promises.

Anyone in a situation desperate enough to warrant at least some form of financial guidance or credit counseling will obviously need to avoid being ripped off, or sold a bill of dubious goods or services, which will only make their plight worse off than it already is. They most certainly require the ability to choose, from far too many options, a legitimate, dependable, ethical, and above all, competent credit counseling firm that has the consumer?s best interests in mind. The best place to begin that process is to understand exactly what a credit counselor or their organization is supposed to do for their clients.

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Credit Counseling ? Defined

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For millions of consumers across this nation who are suffering through this economic slump because of their inability to pay or adequately manage their debts, or just make ends meet, a credit counseling service can and should be responsible for providing important financial management information, guidance, learning materials, and of course, viable solutions. Their services should also encompass money management education, budget and debt counseling, along with some form of recommendations and advice on housing through HUD-certified agencies, and a network of referral services.

From a marketing standpoint, the most attractive incentive offered by these credit counseling services is what is referred to as a debt management plan, or DMP. Within the program?s guidelines, the organization?s counselors attempt to re-negotiate lower rates of interest and monthly payment amounts with the various credit card issuers and other creditors the client is currently obligated to pay. Their total monthly payment amounts are then consolidated into a single, combined payment that the clients would provide to the credit counseling agency, which then distributes the re-negotiated amounts to each of the creditors based on the pre-arranged or scheduled repayment agreement.

Naturally, the cost of these services fluctuates considerably from company to company, and based on the laws within the state each agency does business, some of these companies do offer their counseling services free or at very low expense to the consumer. The general business model these agencies operate under are certainly varied, though in most cases the agency clients normally compensate for their services with a monthly fee for taking part in the debt management program. In addition, the majority of operational funding for these agencies is derived from contributions from the creditors themselves, who then collect the funds owed to them by the participating DMP clients.

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Selecting a Reputable Credit Counseling Organization

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It is of primary importance for the prospective client to ensure that they get the highest quality of services from any credit counseling organization they choose to do business with, and that means researching each one with maximum care. It is a good idea to begin investigation companies that other individuals, such as associates, friends, or family members may have had experience with. Anther great pair of resources is to investigate the agency listings at the National Foundation for Credit Counseling (NFCC) at www.nfcc.org, and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) at www.aiccca.org. Once any particular company seems to be a suitable possibility, then the next round of evaluation is determining how well that company stands up to the following standards:

An Accredited Non-profit Organization ? The baseline criteria should be based on whether or not the company operates as a registered non-profit entity. Unfortunately, there are more than a few of these companies that have seriously misused or exploited this non-profit classification, therefore it is also mandatory that the organization?s operational status has been accredited, qualified, or endorsed by an oversight agency. In most instances, accreditation will usually be sanctioned by the Council on Accreditation (COA), or the International Organization for Standardization (ISO).

Membership in the NFCC or the AICCCA ? In order to ensure that these credit counseling agencies are functioning with the consumer?s best financial interests at the forefront of their business operations, investigate whether or not they are members of the National Foundation for Credit Counseling (NFCC), or the Association of Independent Consumer Credit Counseling Agencies (AICCCA) which have been established to uphold the highest level of quality, financial, and ethical standards within the credit counseling industry.

Retains Certified Counselors, Specialists, or Agents ? While it makes perfect business sense that not only must they complete the organization?s own in-house training program, every credit counselor within that organization would be duty-bound to undergo and pass a certification examination that focuses on comprehending a variety of disciplines such as counseling, budgeting, credit and consumer law, debt management, as well as bankruptcy laws. Examinations and testing should be managed by an impartial group like the Association for Financial Counseling and Planning Education, the Center for Financial Certifications, the National Association of Certified Credit Counselors, the National Foundation for Credit Counseling, just to name a few of the most prominent. If a prospective client requires any counseling services for housing issues, like avoiding a foreclosure, any organization accredited by the U.S. Department of Housing and Urban Development (HUD) would be an important resource.

Offers Practical Counseling, Guidance, and Educational Services ? Each credit counseling program should encompass a series of one-on-one conferences, carried out either in person, over the telephone, or through a web portal, and run for about one hour. Each conference should entail an in-depth analysis of a client?s complete financial condition, a full examination of their income, expenses, the entire debt picture, and the primary causes of the existing financial difficulty, along with the client?s projected goals. At the conclusion of the counseling portion of the program, the client should expect to be given a recommended budget outline, a framework of the subsequent stages of the plan, and a final report detailing all relevant options. The counselor should also make available, at a minimum, educational materials and study guides at no or minimum cost, the chance to join financial management workshops or study groups, and the availability of any follow-up counseling if required.

Offers Several Debt Management Alternatives ? Each credit counseling conference should illustrate more than the single option of the debt management program. Even though that specific program should reduce a client?s monthly payments, fees, and interest rates overall, the DMP may not prove suitable for all clients due to different financial issues. No client should take on a DMP recommendation prior to undergoing the complete counseling period, nor should the DMP be the only option made available, or if the counselor makes it known that they will only be compensated by the client actually signing up for the program.

Affordable or No-Cost Fee Structure ? All credit counseling services worthy of consideration should provide their recommendations and advice at no charge, or for a minimal fee. The industry standard for creating a client-focused debt management plan should not exceed $50. In general, most companies demand a monthly fee for overseeing the DMP, and in most cases is normally a percentage of the monthly payment figure worked out by the counselor. The highest level of payment for this fee should be in the range of 10%, and the more flexible companies often waive these fees if the client is unable to afford them. It is very important that these fees, along with the complete outline of the program details, are put in writing, and on no occasion should a client be coerced into making ?voluntary? contributions, or be forced to sign off on any debt management program that only includes creditors that subsidize the agency financially.

Full Disclosures Regarding Services, Fees, and Revenue ? If the agency refuses to provide a prospective client with general information about their programs and operations without first receiving the client?s personal and financial material, they should be avoided. Their fee structure, along with their sources of revenue should be made available willingly and up-front. It is also critical that they provide a good-faith estimate of exactly how long it will take them to pay off the client?s debts as outlined in the program, and contingent on the client actually endorsing the recommendations. If the program?s timeframe runs between four to five years, it may not the most suitable option, especially when considering the total cost of the monthly fees. However, as long as the client?s active participation continues, the company should willingly provide fully detailed statements, either monthly or quarterly, indicating a complete breakdown of payments made into the account, each disbursement to each creditor, and the estimated balances on each account.

Maintains Evidence of a Reputable Business ? Investigate the company?s performance record with the local or online Better Business Bureau at www.bbb.org, local consumer protection agencies, and even the State Attorney General?s office for listings or documentation of any unresolved complaints or pending legal actions against them. Finding local consumer protection offices by state can be done by visiting www.usa.gov/directory/stateconsumer/index.shtml. Specific state attorney general offices can be found at the National Association of Attorneys General?s website, www.naag.org.

And finally, every potential client should never hesitate to inquire of the availability of listings of past customers and the company?s rate of successful and verifiable program resolutions, along with any locations on their websites that post client testimonials and feedback. It would also be wise to request information from the designated credit counselor detailing the complaint resolution process should it ever be necessary. If the company fails to provide their prospective clients these types of up-front disclosures, processes, or qualifications, it is highly recommended that the search for more consumer-friendly credit counseling services be continued elsewhere.

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Source: http://topofutahlaw.com/guidelines-for-selecting-the-right-credit-counseling-organization/

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