Credit Card Counseling for Consumers

Share Credit card counseling has gain more popularity since the economy crash of last year, and consumer debt has ballooned. 

Now, instead of credit card solicitations in our mailboxes, or on the phone, the most plentiful offers are of ways to get out of debt, obtain credit card counseling, pay off debts at pennies on the dollar, consolidate debts, etc. 

How did we come to this?

Between the economic doldrums, including job losses, and the new regulations of credit card companies, interest rates on card balances have ratcheted up, while consumers’ ability to pay off the balances have gone down.

Entrepreneurs and scammers have seen an opportunity: credit card counseling for consumers. 

Some of these offers to provide credit counseling may be legitimate. Many are not.  Always research a firm before signing up with them. If you see anything about it that makes you uneasy, stay away and look for another.

One major red flag is a demand for high fees up front, before they have been earned.

Good sources of information are the Better Business Bureau, the National Foundation for Credit Counseling, and the Association of Independent Consumer Credit Counseling Agencies. 

These are all non-profit organizations which track companies and complaints against them. 

The NFCC and AICCCA are specifically non-profit organizations for Credit Card Counseling for consumers.

They each have membership standards and training programs to help their members provide high quality honest credit counseling for consumers. 

Among the many features to look for in a credit card counseling agency are;

1. Is it non-profit, and unrelated to a for-profit firm to which is could funnel profits?

2. Is it affiliated with either the NFCC or the AICCCA?  If it is, it is most likely legitimate.  It is wise, however, to confirm through the organization that it is claiming membership in, that the firm really is a current member in good standing.

3. Is the firm accredited by an independent third party, such as the Council on Accreditation? Again, check claims against reality.

4. Does it provide written action plans for the consumer to follow through on?

These are all signs of a legitimate credit counseling organization. 

Once a credit counseling organization is settled upon what can you expect from them?  

They should require accurate reports from you, the consumer, of all your spending, voluntary (such as movies, dining out) and mandatory (rent/mortgage, utilities, phones). In addition, of course, they will require a thorough recounting of all your debt. 

This information can be tedious to produce, but it is important to be accurate with your counseling firm. If you are not, the advice they give you and the plan you and they work out together will not be as good as it could be.

Some credit card counseling firms will negotiate with credit card issuing companies to accept smaller payments on your debts and lower interest rates.  Often the counseling firm will set up an escrow account to which you make payments, and they pay the credit card companies and other debtors out of the escrow. 

Keep an eye on that escrow account. Some illegitimate credit card counseling firms pocket the money. Check with your debtors on whether they are receiving payments, especially in the first month or two.

What you can not expect is a miraculous repair of your credit history and score. The delinquencies and the fact that you went through such a counseling agency will be on your credit report for seven years. 

If you can stay clean, though, the credit agencies will be able to see that you are in control and a good risk. 

Given how many people have lost jobs and income in the 2008-2010 downturn, it is even likely that there will be so many with that history, that credit agencies will not take such a history as badly as they have in the past.

As long as you, the consumer, show mastery of your finances and responsibility in your payments since your need for credit card counseling.

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This information contained herein is a part of Debt Counseling series