What Credit Counseling or Debt Management Plan Helps Consumers?

I recently posted about Marshall Loeb’s online article, Using a Credit Counselor: Why you might need one and how to select one when you do. My first read of his article indicated that Mr. Loeb had the right idea but in reality, credit counseling does not assist in rebuilding credit. I responded that many of my clients first try credit counseling and end up in my office later. Some consultations are referred to a non-profit credit counseling agency. And that is the subject of this post.

I visited the National Foundation For Credit Counseling (NFCC) to explore their site and see what recommendations they might have for folks in severe financial distress. I was pleased to see that none of the Debt Management Plan companies that my clients had attempted was there on their membership page. I was also pleased to see that the members of NFCC pledge to offer low cost assistance with an average start-up fee of $23 and monthly service fees of $14. Those are astonishingly lower than the DMPs that my clients found. And the agencies in Oregon are the ones to which I have been referring my clients.

What I found amazing is that NFCC was also admonishing against the same kind of “for-profit” Debt Management Plan companies. The NFCC site cautioned that consumers should do the following before choosing a credit counselor to work with:

1. Carefully review the company’s record with the Better Business Bureau

2. Find out if the agency belongs to a national organization (like NFCC)

3. Do all of the payments go to the creditors right away and sent to the creditor in a timely manner?

4. Are the credit counseling sessions substantive?

5. Are there other services or is the counseling agency pushing a profitable DMP at the consumer?

6. Is the agency going to be able to work with ALL your creditors?

7. How does the agency protect consumers’ money?

If you are a consumer who is seeking financial assistance and not yet ready to speak with a bankruptcy attorney, then please visit the NFCC’s website, read their material and choose wisely. The companies that advertise on television have a huge budget for that national advertising and where do you think the money comes from? From consumers in financial trouble and the large fees charged by those companies.