Non-profit Consumer Credit Counseling

Non-profit consumer credit counseling agencies are funded through contributions from creditors participating in debt management plans, although some charge fees to the people who use their services, according to the Better Business Bureau. A good counseling firm can educate you to handle your finances yourself or create and administer a formal plan. Some counselors are not legitimate, and non-profit status is only one way to separate good and bad agencies.

Non-profit Status

Consumer credit counseling agencies typically tout their non-profit status, but the BBB recommends verifying their claims through your state's charity official. The National Organization of State Charity Officials can refer you to the proper person in your area (see Resources). Check the counseling company's licensing, too, and verify claims of membership in professional groups like the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. The Federal Trade Commission advises asking how counselor pay is determined. Avoid counseling firms that offer employee commissions if you agree to a certain service like a debt management plan.

Services

Non-profit consumer credit counseling agencies offer a wide array of services, from helping you with budgeting to providing financial education to making referrals to other appropriate organizations. Counselors also act as intermediaries to make and administer repayment plans with your creditors, and sometimes they get you lower interest rates or waivers on late payment fees. The BBB advises that legitimate consumer counseling firms tailor services to your personal situation rather than pushing the same solutions for every client.

Cost

Consumer credit counseling firms may still charge fees, even if they are non-profit, although they should be affordable. Most of the funding for legitimate firms comes from creditor contributions, and initial counseling and education should be free. If you agree to a formal debt repayment plan, the BBB advises that the set-up fee should not exceed $75, and monthly fees should not exceed $40. Get a written fee disclosure and a contract that clearly spells out the terms.

Warning

Non-profit consumer credit counseling agencies sometimes go out of business when you are still in the middle of your debt management plan, the FTC warns. Your account may get transferred to another agency and continue as planned, or it may just stop. Call your creditors if your plan is not transferred and ask if you can continue making your payments directly under the plan terms. Contact your bank immediately if your plan was being paid through an automatic withdrawal to avoid losing any money.