Common Abuses of Debt Management Agencies
As more and more consumers seek debt solutions like credit counseling and debt settlement, also known as debt negotiation or debt reduction, the importance of legitimate and useful debt help services has become increasingly urgent. In light of this, unfortunately, as the need for debt help has increased, so too has the number of quality services available to the public. The purpose of this article is to focus on the problems within the non-profit debt counseling arena and to help consumers discern the "bad actors" from the good ones before they enroll in any type of debt consolidation program.
Much of the problems in the credit counseling industry stems from two facts: 1) credit card companies have dramatically cut funding for non-profit organizations, and as a result, the level of servicing and expertise has depreciated considerably; 2) new companies entering in the credit counseling arena have been able to abuse their non-profit status to turn a significant, tax-free profit. Our aim is to help consumers easily identify the non-profits that fall under number two. The following are four of the most common ways that these types of firms abuse their tax-exempt status:
- Deceptive or Misleading Practices - Despite what your debt counselor may have promised, some credit counseling firms fail to make on time payments, or in extreme scenarios, fail to pay the credit card companies altogether. In other cases, non-profits have been found deliberately exaggerating the interest rate reductions they are able to procure for their clients. In other words, that 0 percent interest rate you were promised in the initial phone conversation may actually end up being 12 percent (if it is reduced at all).
- Excessive Fees - Other non-profit debt management professionals have deliberately charged unwarranted and unnecessary fees. If a credit counseling company tells you they plan on keeping the first payment for themselves, run. On top of this, they will most likely charge a monthly maintenance fee just for good measure.
- Exploiting Non-Profit Status - Some of these same firms were insinuating to consumers that because they were non-profit, they were federally supported and regulated. Others took advantage of generous non-profit telemarketing rules to aggressively market and solicit their debt consolidation help services.
- Lack of Educational Resources - In order to qualify for non-profit status, a debt counselor is required to provided ongoing educational resources and information for the public. Needless to say, many of the non-profits were caught focusing on marketing their debt management plans instead of educating consumers on ways to better budget and manage their personal finances.
Debt Settlement & Debt Negotiation
PayingPaul.Com is not aware of any non-profit companies that operate in this arena, but just like non-profit status does not necessarily ensure legitimacy in the credit counseling industry, the opposite is also true with for profit companies in the debt settlement/negotiation space. Even though debt settlement firms are typically for-profit entities, it is also likely that their service will be less expensive overall for a consumer seeking debt help than credit counseling. The reason for this is debt negotiation involves lowering your principal balances, whereas credit counseling attacks interest, late fees, and other finance charges. Although credit counseling can still save consumers a good sum of money, the savings tend not to be as dramatic as if one were to successfully complete a debt settlement program. This does not necessarily mean you should use debt settlement to solve your debt problems because it is certainly not for everyone. The point being made is that for-profit status does not indicate that the services offered are any less affordable or legitimate than credit counseling programs.
To get matched with credible and inexpensive providers of debt management, simply fill out a form and let PayingPaul.Com help you get out of debt without "Robbing Peter" or filing personal bankruptcy. Get a risk free consultation today!
Non Profit Questions, Advice & Answers
If a debt company is not for profit, does that mean they are government approved?
No, this is not true. Some organizations have gotten in trouble in the past for misleading consumers in regards to this. That being said, many non-profits are in fact government-approved pre-bankruptcy credit counselors>. You can find out if the company you are dealing with fits into this boat by looking them up here: Approved Non-Profit Pre-Bankruptcy Debt Counselors.
I keep hearing about this Ameridebt company as an example of the type of "charity" or "community service" debt agency to avoid. Who are they?
They are now-infamous "non profit" that duped thousands over Americans into paying hefty fees for their debt management plan. Ultimately, like the other scams and rip offs, were shut down by the Federal Trade Commission.
Where should I start for debt help?
Right here at PayingPaul.com! Fill out a form and let us match you with a provider who can help you get credit card debt free.