Consumers and Debt: Finding the Right Credit Counseling Agency for You

Credit card debt in the United States is rapidly approaching the $700 billion mark. This figure has led an estimated nine million Americans to seek the assistance of credit counseling agencies. As a result, the credit counseling arena has expanded drastically in recent years and is becoming increasingly competitive.

If you find yourself in need of credit counseling services, do your homework before selecting an agency to work with. The following are some consumer tips in order to ensure you receive quality credit counseling and avoid agencies that charge high up front fees or use high pressure sales tactics.

• Shop around. Inquire at 2-3 agencies before making a final decision and consider visiting those agencies in person to determine which one best suits your needs. A face-to-face meeting can be more thorough and direct as opposed to a telephone or internet consultation.
• Look for specific services. Seek an agency that offers a variety of counseling options, not just enrollment in a debt management plan (i.e. a debt consolidation program). These options can range from educational counseling (e.g. debt management classes) and budget counseling to managing your own finances.
• Ask questions. Inquire about the agency's privacy policy; whether or not they utilize an employee compensation program for debt management plan "sign-ups"; what, if any, costs and/or fees are associated with enrollment; whether or not participation in a debt management program will effect your credit rating; and specifically ask about credit concession (how much lower will your monthly payments be, how long will it take for you to pay back your debt and whether or not the agency will deal with all your creditors) and the agency's payment schedule (does the agency make payments on your debt according to your creditor's schedule or according to the agency's own schedule).

Avoid agencies which engage in the following activities:

• High fees and "voluntary fee." Some agencies claim their set-up and monthly fees are "voluntary", yet they fail to inform the consumer of this fact. Others charge excessive fees (more than $50 for sign-up and more than a $25 monthly fee). If the agency conceals the fact that their fees are voluntary or the non-voluntary fees are excessive, seek a better deal. The fact that the company is non-profit does not necessarily mean that they will be offering affordable fees.
• Aggressive advertising and agents. Quality credit counseling includes various options offered by skilled agents. If the agency's advertisements are deceptive, or you feel pressured by one of their agents to enroll in a specific plan, seek another agency.
• Employees paid by commission. If an employee works off commission dependant on your enrollment in a particular program he/she may not be working with your best interest in mind. Find an agency that focuses on your interest when counseling you.
• Limited options. An agency should counsel you on all appropriate and available options, not just debt management plans (i.e. debt consolidation programs). If an agency fails to counsel you on all possible options, find one that does.

If you feel that you have been taken advantage of or simply want more information on credit counseling agencies you can contact The Office of the Attorney General's Bureau of Consumer Protection Hotline at 1-800-441-2555.