Information about...

1. Commercial Agriculture
2. Environment & Natural Resources
3. Fisheries & Aquaculture
4. Food, Nutrition & Health
5. Home, Lawn & Garden
6. Youth, Community & Economic Development

Credit Counseling Agencies: Choose With Care

The months immediately following the holidays are a time of increased financial stress for many people. High winter fuel bills, combined with high outstanding credit card balances from holiday spending, can make it difficult to make ends meet.

In times of financial stress, many people turn to credit counseling firms for advice and assistance in arranging payment to their creditors. In 2000, an estimated 3 million borrowers took this step. According to an article about credit counseling in the July 2001 issue of Consumer Reports, counseling agencies are funded primarily by creditors, who cover the bulk of their operating expenses. In recent years, however, concessions from creditors have been reduced.

Some credit counseling firms function like social service agencies and provide face-to-face counseling to clients while others use high-tech communications systems and payment systems to deliver services. Two large groups of agencies provide the bulk of counseling services: the National Foundation For Consumer Credit (NFCC), a network of Consumer Credit Counseling Service (CCCS) offices, and the Association of Independent Credit Counseling Agencies. There are also some heavily advertised independent agencies that belong to neither trade group.

When consumers enroll in a credit counseling agency debt management plan, they typically make one monthly payment to the agency that is disbursed to their creditors. Involvement with a credit counseling agency is noted in a person's credit file but, if they are already have negative information (e.g., late payments) recorded, it probably won't worsen their credit score. Credit counselors also help clients design a spending plan (budget) to live within their means.

Below is some information about how to select a credit counseling agency:

• Investigate The Company - Don't make a decision based solely on radio or television advertising. Ask the firm to send you written materials about its management, how long it's been in business, and, specifically, what services are provided before you commit to making payments.
• Do Not Pay Before Service is Received - No legitimate counseling agency charges large mandatory up front fees. A nominal application fee (e.g., $35 to $50), however, may be charged, sometimes on a sliding scale according to income, as well as modest monthly charges of $2 or $3 per creditor.
• Ask How You Can Track Payments To Creditors - One of the biggest complaints about credit counseling agencies is that they are slow in paying creditors. This results in late fees and letters requesting payment from creditors. One key question to ask is "how will I know that my payment to you will be made to my creditors promptly?" The best credit counseling agencies make payments to creditors weekly (versus monthly) and provide consumers the ability to track their payments online.
• Ask About Counselor Training - Check the training and experience of an agency's credit counselors. NFCC counselors, for example, must pass a certification exam and participate in ongoing training. NFCC agencies, themselves, are also independently accredited.
• Know What Is Expected - Many credit counseling agencies will require their clients to surrender their credit cards so as not to incur further debt.
• Look For State Licensing - New Jersey is one of 17 states that regulate credit counseling services. Below are the names and phone numbers of the eight state-licensed agencies: American Credit Alliance (800-501-7526), Budget and Credit Counseling Services, Inc. (800-475-1994), Consumer Credit and Debt Counseling, Inc. (800-720-2232), CCCS of Delaware Valley, Inc. (800-989-2227), CCCS of New Jersey (888-726-3260), CCCS of Central New Jersey (888-379-0604), CCCS of South Jersey (888-473-2227), and Garden State Consumer Credit Counseling (800-992-4557).