Is Credit Counseling A Scam?
Posted on June 25, 2009 at 1:10 am
I came across an article that described the credit counseling business as "fraught with fraud, misrepresentation and controversy." It didn't directly call credit counseling a scam but if it is that shady, why is it around?
Posted on June 25, 2009 at 1:31 am
There are scammers among the credit counseling agencies but there are non-scammers as well, which can help people who are behind in debt to get back on their feet just fine. The trick is to be able to identify which is which because if you fail to do so they can, not only, disappear with your money, but they could also do some damage to your credit rating. Beware of companies that have the word "non-profit" in them.
Posted on June 25, 2009 at 1:36 am
can't the government regulate the entities that open dodgy credit counseling businesses? there are a lot of them, it's confusing!
Posted on June 25, 2009 at 1:42 am
There is an accreditation process in place of course but you know how bad entities are-they'll find a way around the system, and so you are just going to have to do your homework on this, I'm afraid. If you are looking for a legitimate credit counseling agency you can check the directory of NFCC or the National Foundation for Credit Counseling and AICCCA or the Association of Independent Consumer Credit Counseling Agencies
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Posted on June 25, 2009 at 1:46 am
Or you may also check the complaints listing at your State Attorney General's website and the BBB (Better Business Bureau). The BBB also have information such as whether or not the agency has responded to the complaint or if it has been resolved or not.
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Rep Points:
Posted on June 25, 2009 at 1:52 am
i can feel your skepticism on this and i guess you've every right to. anyway on a more personal level, the best way to be sure if the agency is legitimate, is to make your skepticism work by interviewing several potential agencies. Ask about their fees and policies. you can also ask from people you know for recommendations.
Posted on June 25, 2009 at 1:57 am
You can also look at the files of the U.S. Trustee Program. Those who are to file bankruptcy has to go through a court approved credit counseling course. They must have a listing or a directory of reputable agencies. Surely scammers won't be able to get through the US Department of Justice?
Posted on June 25, 2009 at 2:07 am
and you're probably also wondering how they scam people in the first place? in a country that has a high literacy rate too. great sales pitch of course and good timing. how counseling services work is they negotiate with the creditors to lower the consumers payments and then make the payments using a check or the money sent to them by the consumer each month (electronic transfer).how are they earning from it? most of them are paid by the creditors themselves, by sending back a portion the consumer's payments that they've received. it is called "fair share." and they earn from penalty fees as well.
Posted on June 25, 2009 at 5:56 am
I guess nobody would say "yes credit counseling is a scam" except those who have been victimized by the scam agencies, but still, that does not represent the whole industry. If you feel uncomfortable with it then follow your hunch and try the other debt relief options instead.
I'm afraid most of us in the threads are not what you may call 'debt experts' but there are debt experts around, if you want to speak with one, fill out one of the forms that you see around. Don't worry it's not going to ask for a fee.
Posted on July 7, 2009 at 5:42 am
To avoid credit counseling scams I suppose it's better if you employ the services of non-profit organizations, the ones that supposedly do not charge any fees, and instead go for those that are upfront with their fees.
Also if you've checked their record and they've already had 3 complaints against them, then that's your cue to look for a cleaner one.
One of the fundamental laws to avoid being scammed also is to never send money before any service is done for you. Don't give deposits even if they say that they need the money to perform that first task. If they are a legitimate company they would have money for it.
Lastly, I guess you'd have a gut feeling about things, if it sounds too good to be true..it probably is.
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