Consumer credit counseling factors to consider and what to expect

Consumer Credit Counseling: Factors to consider and what to expect May, 2009 Developed by, Carolyn L. Bird, Ph.D. Stale University A&T State University COOPERATIVE EXTENSION Empowering People • Providing Solutions Consumers who are having difficulty making credit payments frequently seek assistance from a third party organization to develop a livable approach to debt resolution. Consumer credit counseling can be an effective resource for restructuring payments that fit within an established household budget. The following information provides tips on selecting a credit counseling agency and what to expect from their services. Choose in-person counseling when possible. Credit counseling agencies provide their services through in-person meetings, telephone consultation, or by internet support. In- person counseling meetings, when geographically possible, offer the best opportunity for Information exchange developing a relationship with your counselor. The most convenient counseling office may be one near work, home, your childcare provider or other frequently visited location. Carefully select the credit counseling agency. At one time, only a few credit counseling organizations existed. Today, there are many organizations offering assistance to consumers. As with any other product or service, not all credit counseling services are the same. Consumer credit counseling services are not federally regulated, meaning organizations who offer credit counseling are not required to adhere to a uniform set of national standards or procedures. Many states require an organization to register or obtain a license to offer debt management plans. In North Carolina, the Department of Justice is the licensing organization for consumer credit counseling agencies. Be sure the organization you select is licensed and does not have pending consumer complaints. The selection of a credit counseling agency is a major decision. Agency errors, omissions, or failure to make timely payments on your accounts can have a long-lasting effect on your credit report and negatively impact your ability to obtain credit at a reasonable interest rate. Why creditors will work with an agency. Creditors are more likely to reduce interest rates and/or lower payments when a credit counseling agency approaches the creditor for you. The creditors know that the agency will distribute the payments on your behalf. Also, agencies typically set guidelines concerning the use of credit while you are in the debt management program. These factors increase the creditor’s confidence that it will receive future payments according to the agreement. Your agreement with the credit counseling agency. You are in a debt management program (DMP) when you agree to let a credit counseling agency distribute your money to make debt payments. You will make one payment each month to the counseling