Some Credit Counseling Services Can Leave You More in Debt

SEATTLE - How can a non-profit service that helps you get out of debt, leave you deeper in debt than when you started?

Under the new bankruptcy laws that take effect later this year, one of the requirements before you can file is working with a non-profit credit counseling service.

But the truth is, a lot of those so-called "non profit" credit counselors are so in cahoots with "for-profit" companies -- it's a joke!

So while the feds are figuring out what to do about it, here's what you need to know:

There are 2 types of credit counselors. The "old school" that work with your creditors and help you set a budget.

And the new school -- the aggressive marketers that target consumers on TV ads and on the Internet.

With "old school" credit counseling, you send the counselors a monthly check that includes small set-up and monthly fees based on your ability to pay, typically around $25-$50 for set-up and a flexible $15 a month.

They pay your bills, and the fees cover your debt counseling and the operating costs.

The "new school" counselors push dept management programs. Your payments can include excessive fees -- sometimes hundreds of dollars.

After the service pays your bills, they funnel the extra fees into their for-profit partners.

So before you sign up for any credit counseling service, ask these questions:

What services do you offer?

Do you have free educational material?

Are you accredited, with trained and certified credit counselors?

And what are your fees?

Ideally, you should only deal with a debt counselor in your community where you can have regular, one-on-one counseling.

Stay clear of any company that claims to be free, but charges unexplainable fees they claim are voluntary.

The Federal Trade Commission recently reached multi-million dollar settlements against 3 debt management companies and several more are under investigation right now.

For More Information:

For more information on Credit Counseling and what to look for:

www.cccsatl.org
www.ftc.gov
www.ftc.gov
Consumer Counseling Northwest