Many Americans wish they had someone they could turn to for honest advice on how to handle debt. And, while crowdsourcing opinions and stories from people in your life can definitely generate some good starting ideas, there’s a big difference between a friend offering anecdotal tales and a trained professional offering personalized advice based on facts.
You may have heard of consumer credit counseling or even considered reaching out to a credit counselor to set up an appointment. But, before you do, you want to know: Can you trust consumer credit counseling? The answer is generally yes — as long as you choose a reputable agency and connect with the right counselor based on your needs.
Finding a Credit Counseling Agency
Your credit counseling experience will only be as good as the agency through which it’s facilitated. One solid way to establish trustworthiness is choosing an agency approved by the U.S. Department of Justice (DOJ).
The DOJ notes agencies must disclose their fees before the first counseling session and before obtaining any personal information from you. Reputable agencies will abide by these rules at all times and empower you to make an informed choice. Scammers may try to obscure their fee structures or obtain your personal information before providing you with clear information about their services.
Questions to Ask Before Signing Up for Credit Counseling
Once you have one or more agencies in mind with strong reputations and good business practices, reach out for an initial conversation. This is your chance to ask questions and vet any potential credit counselor, so think about what you want to know ahead of time. Take the time to consider what you need to get from the experience as well.
The Consumer Financial Protection Bureau recommends asking these questions when evaluating an agency.
– What services does your organization offer? For instance, some credit counseling agencies specialize in bankruptcy counseling, while others offer budget advising and debt management programs as well.
– How does your agency take appointments? Some organizations are online or phone only, while others run in-person sessions as well.
– What training and professional certifications have you received? What licensure do you have in my state?
What Is Debt Management in Credit Counseling?
Debt management is often mentioned in the same breath as consumer credit counseling. Also considered a form of credit card consolidation, this is a service in which a credit counselor can enroll you after your initial consultation — if it fits your budget and goals.
What are the potential upsides of starting a debt management plan (DMP)? DMP enrollees usually earn a “concession rate” on the interest they owe, meaning the borrower can pay less in fees and interest charges over the course of their loan. They also start making just one monthly payment to their credit counseling agency, which in turn passes those funds off according to the terms agreed upon by lenders, making it easier to keep track of monthly obligations.
While credit counselors can and should mention debt management as an option, be wary of any agency that pushes a DMP as the only solution — or tries to convince you to sign up before you’ve had a chance to consider the advantages and disadvantages.
At the end of the day, you can typically trust consumer credit counseling with a few caveats. Namely, you should be sure to work with a legitimate agency and a well-qualified counselor who’s more than happy to answer all your questions. The agency should never force any solutions on you, but rather give you the information and guidance you need to make your own confident decisions.