Not All Consumer Credit Counseling Agencies Are Created Equal

If you are researching debt consolidation and credit counseling options, you may be coming across a mixed-bag of advice. If you follow the headlines, you have probably encountered stories of credit counseling firms being targeted by the FTC and debt consolidation scams being shut down by government agencies. If you are planning on enlisting the help of a credit counseling agency, it is important to know what to look for.

Consumer Credit Counseling Agencies

Consumer credit counseling agencies are best known for their debt consolidation plans or debt management programs (DMPs). In addition, they can also provide money management education, budgeting assistance, and housing-related counseling if properly approved. If you are concerned that you are losing the battle against consumer debt or simply need assistance putting a family budget together, consumer credit counseling may be an appropriate option.

Registered Non-Profit

The first thing to look for is a registered non-profit agency. Tax-exempt status, in and of itself, will not dictate which counseling agency is best for you. In theory, non-profit organizations should be more concerned with your well-being than their own bottom-line.

Member of Industry Associations

The counseling agency should be a member of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA). These agencies require that their members follow a strict code of standards.

Certified Counselors

The individual counselor you will be working with should be certified by an independent third-party organization. While most counseling agencies will train their own counselors, independent certification usually means the counselor underwent additional education and training.

Provides Education and Counseling

The consumer credit counseling agency you choose to work with should emphasize education and counseling. They should take the time to understand your financial situation and your goals and walk you through areas you can work on yourself.

Provides Options

The agency should also provide you with options tailored to your situation prior to pushing you into a debt management program. Some experts argue that if a credit counseling agency suggests a debt management program within the first 30-minutes of meeting with them, you should go elsewhere.

Proper Disclosure

You should receive proper disclosures covering the fees associated with working with that agency, the agency's sources of revenue, as well as any timeline and estimates involved with a debt management program.

Ultimately, if you choose to go down the path of debt consolidation and credit counseling you want to find an agency that cares more about educating you and providing you with options than rushing you into a debt consolidation or debt management program. They should be upfront with how they work and take the time to understand your specific situation.

About the Author:
Chris Rocks is the Founder and Executive Director of the Credit Advisory Alliance (CAA). CAA is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.

Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.

He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.