Counseling services are available, but some of those companies charge excessive fees and may not perform as promised. A report by the National Consumer Law Center and the Consumer Federation of America found that some of the counseling companies are in business for high profits rather than to help consumers reduce their debt. The Federal Trade Commission has issued an announcement that warned consumers about advertisements promising quick fixes to credit problems.
If you decide to seek debt counseling, be aware that there are good agencies and bad ones. Because of the bad ones, you'll have to be careful in your selection. Counseling services may be nonprofit or for-profit. Some firms have registered as nonprofit with the Internal Revenue Service, but their real objective is to maximize their fees rather than help their customers.
You should shop around before signing up with a counseling company to repay debts. Consumers have been hurt by hidden fees and by sloppy practices that resulted in late or missed payments to creditors. Others have been misled by companies that advertised debt management but actually steered clients to take out consolidation loans.
- Look for a plan that does not require or request fees or "contributions."
- Call the Attorney General's Consumer Protection Division at 1-888-743-0023 to see if other consumers have filed complaints against the company and to find out how long it has been in business. In Hagerstown, call 301-791-4780.
- Read the agreement carefully to understand how it works and what your responsibilities are.
- Follow up with creditors, to be sure they have agreed to accept the plan and are receiving payments.
Although these services promise to make things easier for you, you can't just write the check and assume that everything is OK. You need to ask a lot of questions and follow up to be sure creditors are being paid.
An alternative may be to handle credit problems yourself by contacting creditors and asking for help.
Lynn F. Little is a family and consumer sciences educator with Maryland Cooperative Extension in Washington County.