No matter what issue you are facing, getting access to reputable and reliable help is vital. Unfortunately it's often hard to know where to look—many companies say they can help you with your problem and get you out of debt, when all they really want is to make a profit.
A 2005 report by a U.S. Senate investigating committee observed: "Some new entrants to the industry, however, have developed a completely different business model—a 'for-profit model' designed so that their non-profit credit counseling agencies generate massive revenues for for-profit affiliates." The report applauded the National Foundation for Credit Counseling (NFCC) for its commitment to ethical credit counseling that is provided at low or no cost to consumers.
Clarifi is a registered credit counseling agency through the NFCC and a 501(c)(3) non-profit organization. We believe that consumers need to be educated about how to select a credit counselor and how to identify an agency that might not have their best interest in mind.
Questions to Ask
If you're considering using a credit counseling agency, do the research to find the right one. Ask each agency the following questions, and make sure that you are comfortable with their answers before you book that first appointment.
Is the agency affiliated with a national body that regulates their practice?
- Ex. National Foundation for Credit Counseling (NFCC)
Is the agency accredited by an independent third party?
- Self-accreditation is not the answer you want.
- Ex. A reputable third party body is the Council on Accreditation (COA)
Is the agency a 501(c)(3) nonprofit community organization?
- Being a non-profit does not guarantee the agency is legitimate, but it’s a step in the right direction.
Who is on their Board of Directors?
- Board members should not be paid by the agency, should not be family members or friends, and should represent a cross-section of community and civic interests.
What services does the agency offer?
- A wide-range of services is a good sign.
- Ex. Budget counseling, Debt counseling, Housing counseling, Foreclosure Prevention, and Bankruptcy.
What are the fees associated with the services?
- The agency should tell you about fees up front, and no fee should be charged before the service is provided.
- Any initial consultation fee or monthly fee should be reasonable, usually defined as $50 or less, with monthly fees in the $25 range.
- The agency should be willing to waive all fees in cases of true hardship.
What delivery options are available to you for counseling?
- In person, phone, online? Do the available methods meet your needs?
Is the counselor assigned to you a Certified Consumer Credit Counselor?
- NFCC certification means that the counselor has passed a rigorous battery of tests measuring their financial knowledge.
Does the agency provide educational classes or workshops?
- The absence of any true education offered to the general public is a red flag.
Will the agency work with all of your creditors?
- Some agencies only work with creditors who agree to make a payment to them.
- A legitimate agency will take a holistic approach to solving your financial distress.
Is there a minimum amount of debt required to be counseled?
- True credit counseling agencies will work with you regardless of how large or how small your debt may be.
What debt relief options are offered?
- If the only tool is the Debt Management Plan (DMP), keep shopping.
- A DMP is a useful tool, and is often the appropriate resolution but other options should be considered.
- A one-size-fits-all approach signals that you should continue your search.
Are the counselors compensated for writing Debt Management Programs?
- Any such incentive is not a part of a legitimate agency's pay to their counselors.
How long will your counseling session last?
- A counselor cannot do an adequate overview of your finances in a short amount of time.
- An initial session length of at least one-hour is standard.
If you go on a Debt Management Plan, how soon after receipt of your monthly payment will it be disbursed to creditors?
- The success of a DMP depends on timely, consistent payments to creditors.
What happens to your first payment?
- Believe it or not, some agencies keep the consumers first payment and consider it a donation. Be sure to ask.
Will the full amount of your payment be disbursed to your creditors?
- The full amount should go toward the repayment of your debts, with no portion going into the agency's pocket.
How will your deposits be protected?
- Ask for written evidence that the agency is bonded or insured to protect the consumer from fraud or the agency's own financial difficulties.
Legitimate credit counseling agencies counsel and financially educate millions of consumers each year, making financial stability a reality in their lives. It all starts with selecting the right agency.
Asking the above questions, and receiving the right answers, will ensure that your credit counseling experience is a positive one.