Who Regulates Credit Counselors?

Ten years ago, less than a million people had sought the help of credit counselors to help them manage their money. Today, as many as 10 million people are currently working with credit counselors to get themselves out of debt. Predictably, if the economy results in more people who are either out of work or victims of rampant inflation, they will seek help. However, finding a trained, ethical credit counselor is not easy to do because there are only two trade organizations that monitor credit counselors.

History

As consumer debt was heading towards $3 trillion and the average American family shouldered over $10,000 in credit card debt, alone, creditors began to create nonprofit credit counseling agencies to help those families find ways to handle their debts. Those agencies created debt management plans (DMP) for their customers and the creditors paid them about 15 percent of the amount outstanding to fund the agencies' efforts. Unscrupulous entrepreneurs saw the profit in these operations, which gave rise to the questionable operations that exist today.

Considerations

If you believe you will benefit from a credit counseling company, you should do due diligence in finding one with a good reputation and whose counselors have received training in this field. Start by contacting the Better Business Bureau in your area to learn about the agencies near you. Also, you should make contact with the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) through their websites.

Types

Most credit counseling agencies are not-for-profit and receive their income from the creditors, themselves. There are others that require that you make a small contribution in addition to what they receive from creditors. And there are those who provide a level of service that warrants significant payment from its clients.

Function

Credit counseling agencies should be populated with trained professionals who can give advice to those people with credit problems. In deciding on one, you should determine if the same person will always handle your account as opposed to a counselor that is chosen randomly each time you call.

Potential

Because of the lucrative nature of the credit counseling business, more unscrupulous companies will be created to take advantage of consumers who are suffering financially. Not only are they attracted by the favorable way that they can profit from this business, some have even absconded with consumers' funds that they thought were being paid to reduce their debts. More than ever, you should check out available agencies before deciding to do business with them.