A debt management plan (DMP) is a method of paying personal debts.† It typically involves accounting for all debts, assessing income and budget, then negotiating interest rates and payments with lenders.† DMPs are usually a managed, informal arrangement with creditors.
Reputable credit counseling organizations employ counselors who are certified and trained in consumer credit, money and debt management, and budgeting.
Not all credit counseling organizations provide these services. Some charge high fees, not all of which are disclosed, or urge you to make ďvoluntaryĒ contributions that can cause you to fall deeper into debt. Many claim that a debt management plan is your only option before they spend time reviewing your financial situation, and offer little or no consumer education and counseling. Others misrepresent their nonprofit status or fraudulently obtained nonprofit status by misrepresenting their business practices to regulators.
The Federal Trade Commission (FTC), the nationís consumer protection agency, and some state Attorneys General have sued several companies that called themselves credit counseling organizations. The FTC and the states said these companies deceived consumers about the cost, nature, and benefits of the services they offered; some companies even lied about their nonprofit status. Several of these companies are now going out of business. Similar companies also may be shutting their doors, even though they havenít been sued by the FTC or the states. That could be of special concern if you have a debt management plan with one of these companies.
If you have been the victim of a debt management/settlement company, you may also have a private cause of action.† Contact an experienced consumer lawyer to discuss your options.
Source:† Federal Trade Commission