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“One Man’s Opinion”
By: Don Calamaro
Beware of the Credit Counselor!
It’s a fact that easy access to credit in America has led many individuals to slowly but surely take on too much personal debt. It has also given rise to an industry, the credit counseling industry, that poses a severe threat to consumers. In the past, most of the counseling agencies were funded by the credit card industry, who was looking to help users pay back their debts. Today, new agencies often prey on individuals who are already in a difficult position, by offering improper advice or charging exorbitant fees for their services. They often employ deceptive practices, and masquerade as non-profit organizations to gain a consumer’s trust so that they can extract even more.
Three major problems exist with credit counseling today, according to a study released by the Consumer Federation of America in April, 2003. They include:
- Deceptive and Misleading Practices – Focusing on agencies that don’t make consumer’s payments on time, claim fees are voluntary when in actuality they are not, or don’t clearly disclose fees to potential clients.
- Excessive Costs – In the past, most of the non-profit counseling services charged no fees. Today, most agencies now charge to set up a debt management program (DMP)
- Abuse of Non-Profit Status – While almost every agency in the business maintains non-profit status, many are blatantly run like for-profit businesses, paying executives salaries that are much higher than non-profits. It is clear that these organizations are not operating exclusively to accomplish charitable or educational purposes, as is required of non-profits.
Consumers need to be aware that there are many agencies looking to take advantage of them! They need to make a careful evaluation before deciding which, if any agency is worth working with. Some practices that should raise concern include:
- High Fees
- “Voluntary Fees” that are actually required
- The “hard Sell”
- Employees Paid on Commission
- Aggressive Ads
You can read more about the deceptive practices of credit counseling agencies at the Consumer Federation of America website, www.consumerfed.org.
One Man’s Opinion!
“One Man’s Opinion” is written by syndicated columnist Don Calamaro. Don holds an MBA from Temple University in Real Estate and Finance. His column delivers practical advice that will help you save money.
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