Credit Counseling
“If it isn't the sheriff, it's the finance company; I've got more attachments on me than a vacuum cleaner!” -- John Barrymore (1882 - 1942)
When your budget has not solved your debt problem you are well advised to locate a legitimate, fully licensed non-profit debt counseling service that offers debt help delivered by professional consultants. But you must exercise caution when seeking out the debt help you require as not all credit counselors are created equal.
Sue Ann Slates, Attorney, Executive Office for United States Trustees published a very insightful article about Credit Counseling Services.
Credit Counseling Services
“Credit is a system whereby a person who cannot pay gets another person who cannot pay to guarantee that he can pay.” -- Charles Dickens (1812 - 1870)
Non Profit Credit Counseling Services
There are several national associations that encompass most of the nonprofit segment of the industry, but they have no regulatory powers. There are also numerous independent nonprofit providers--among them large-volume, multi-state operations that operate through toll-free telephone numbers or the Internet, rather than through face-to-face consultations with debtors in local offices. It is estimated that more than 1,450 nonprofit credit-counseling services operate in the United States.
Although the members of the nonprofit associations may comply voluntarily with the associations' internal standards, they are generally unregulated by state laws or regulations.
Most states exempt nonprofit credit counseling services from their laws governing credit counseling providers. Several states have no laws at all governing the operation of credit counseling services. Only Illinois, Iowa, New Jersey, Oregon, Rhode Island, Utah and Virginia have laws applicable to both nonprofit and for-profit credit counseling services that provide for oversight and licensing or registration of such services.
For-Profit Credit Counseling Services
For-profit credit counseling organizations generally fall within the purview of a majority of states' applicable laws and regulations, but the quality and type of services they provide are variable. In some cases, the fees they charge clients are higher than those charged by nonprofit groups.
One need only peruse any metropolitan telephone directory to discover the wide spectrum of organizations that advertise credit-counseling services. Credit-counseling services are available from nonprofit organizations, for-profit organizations, schools, churches, legal-aid organizations, and attorneys, to name but a few.
Credit Counseling Service Function
For purposes of this article, "credit counseling service" means an organization that exists and functions to serve its consumer debtor clients and their creditors by attempting to resolve debts through the formulation of individual debt repayment plans.
The credit counseling service seeks, when possible, reduction of the amount of debt and reduction or elimination of fees and charges accrued on the debtor's accounts. The debt repayment plan provides for payment to creditors over a period of time during which creditors withhold enforcement of their claims. Generally, clients are expected to stop using their credit cards and to refrain from applying for any new credit during the term of the repayment plan.
Debt Repayment Plans
“The surest way to establish your credit is to work yourself into the position of not needing any.” -- Maurice Switzer
Nonprofit credit counseling services offer a variety of services that may include counseling, debt repayment plans, and education.
Typically, when an individual contacts a nonprofit credit counseling service to inquire about a debt repayment plan, he or she will be asked to provide information to a credit counselor.
This may take place in person, through a toll-free telephone number, by fax transmission, by mail, or over the Internet. Such information may include personal data, gross and net monthly income from salary, income from other sources, assets, monthly living expenses, housing data, a list of creditors, a list of debt obligations, and account and payment data.
This information is used to evaluate the client's financial situation to determine whether a debt repayment plan is a viable option. Some providers require clients to sign an agreement and other authorization forms. Credit counseling services may be free to the client or may involve a monthly fee.
If a debt repayment plan is developed, it is likely to provide a payment schedule tailored to the client's needs and ability to repay. The plan may include reduced payments to creditors and reduced or waived finance charges, late fees, and over-limit fees.
Each month, the client sends a payment to the credit counseling service, which in turn sends payments to creditors. While most creditors pay a "fair share" to the credit counseling service, each creditor credits the client's account with 100 percent of the payments.
Credit Counseling Services and Unsecured Debt
Significantly, most credit counseling services handle only unsecured debt, so clients must continue to make payments to secured creditors and other creditors not included in the repayment plan.
The purpose of the plan is to settle the client's debts and repay creditors and perhaps more importantly, it has been proven time again that embarking on a debt management program benefits the debtor immediately by releasing them from the unrelenting pressure that controlled their lives. They can breathe again.
The United States Trustees acknowledged Certified Credit Counseling Services.
