Credit counseling agencies provide consumers with information that helps them better manage their money, credit and debt. However, there are predatory practices within the industry that consumers need to be aware of. Knowing what to look for in a credit counseling agency will help you choose a reputable organization.
Nonprofit Agency
The United States Department of Justice provides a list of approved, nonprofit budget and credit counseling agencies that must continually meet specific requirements to remain on this list. These companies are required to charge reasonable fees, if any at all, and are required to provide services regardless of a clients ability to pay.
Certified Counselors
The Association for Financial Counseling and Planning Education offers credit counseling certification. Membership in the organization does not require certification, so it is important to verify certification of a credit counselor.
Association Memberships
Membership in the National Foundation for Credit Counseling and Association of Independent Consumer Credit Counseling Agencies ensures that credit counseling is provided by certified counselors.
Cost
A reputable consumer credit counseling agency will charge a reasonable fee for the initial consultation as well as monthly fees. Anything more than $50 is considered unreasonable by industry standards.
Payment Allocation
Credit counseling agencies often arrange payment plans with a clients creditors in which the client makes one monthly payment to the agency, which then distributes the money to the creditors. The first monthly payment on this arrangement should not be taken by the agency as a fee for its services. This practice is considered unethical.
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