What You Should Know Before Selecting a Credit Counseling Agency

“Credit counseling can be a financial lifesaver when it’s done right." Consumer Reports

There are literally hundreds of companies in the credit counseling and debt management industry, both private businesses and nonprofit entities. AAA Fair Credit FOundation (FCF) advises consumers to exercise caution when seeking debt relief. In addition to checking a credit counseling or debt management organization's credibility rating with the Better Business Bureau, FCF advises consumers to conduct due dilligence on such organizations by asking the following questions before entrusting them with their financial future:

• Is the agency accredited by a reputable third-party organization? If yes, by who? (ISO 9001:2000 & COA are the only two approved by most major creditors and States).
• Does the agency maintain all applicable licensing, registration, bonding and statutory requirements in states where business is conducted? (Not all states have regulations in place for the credit counseling industry).
• Are there adequate insurance policies in place to assure protection of client funds? (The agency should carry adequate D&O, E&O and employee dishonesty insurance with appropriate limits).
• Do Counselors spend enough time thoroughly reviewing your financial situation before making receommendations?
• Are Counselors compensated based on the outcome of the counseling process? (Counselors should not receive a commission or financial incentives of any kind for enrolling a client on a DMP or financial education program).
• Has the agency been in business long enough to have built a solid reputation?
• Have other consumers been satisfied with the service that they received?
• Does the agency have a satisfactory record with the Better Business Bureau (BBB)?
• Does the agency offer educational resources?
• Does the agency employ certified counselors which have been properly trained and certified through an established independent third party certification process.
• Are they affiliated with a national trade association to help assure they maintain quality standards and good customer service?
• Are clients fully credited for all and full payments to creditors? (Some agencies will deduct their fees immediately resulting in the creditor not receiving the full payment amount. This practice causes further late payments to the client).
• Does the agency ensure that personal information on individual clients is kept confidential and secure unless permission to release information has been obtained?
• What service fees does the agency charge the consumer and are they disclosed upfront?
• Will the agency work with all creditors, regardless of whether they are financially supporting the organization through voluntary contributions?
• Does the agency provide additional services such as budgeting, counseling and financial education in addition to debt management services? (If the consumer chooses to enroll in a debt management plan, ongoing counseling sessions should be conducted.)
• Are the financial books and records of all client deposit accounts audited annually? Is the audit conducted by an independent certified public accounting firm?
• Are Client funds kept separate and segregated from genral operating account funds. Client funds should be deposited in a federally insured financial institution.
• Debt Management Plans should be established only when they are appropriate and advantageous to the client. No client should be refused a DMP for minimum balances owed to creditors and no creditor should be excluded from a DMP unless the creditor is unwilling to participate.
• Prior to the receipt of the client's first deposit when enrolling in a DMP, the agency should provide each client with a reliable estimate of the length of time it will take to complete the plan. This should be provided in writing and identify all creditors included in the plan, the total debt owed and the proposed payment to each creditor, and the anticipated number of months to liquidate the debt.
• How often are client funds disbursed to creditors? Client funds received for a DMP should be disbursed to the creditors no later than 15 days from date of receipt, or by the scheduled disbursement date, whichever is greater.
• Does the agency provide 24/7 online account access for clients participating in a DMP?
• Does the agency offer electronic payment processing linked to creditors?
• Does the agency have existing relationships with most creditors?
• Has the agency established a support network to connect consumers with other community partners?

AAA Fair Credit Foundation (FCF) was founded in 1996 and is a registered 501(c)(3) non-profit organization located in Salt Lake City, UT. FCF is ISO 9001:2000 accredited and is a member of the national American Association of Debt Management Organizations (AADMO). As an AADMO member, FCF meets the highest standards for agency accreditation, counselor certification and policies that ensure free or low-cost confidential services. FCF maintains a satisfactory rating with the Better Business Bureau. FCF offers counseling in-person at six satellite counseling offices in Utah, over the phone at 1-800-351-4195, and online at www.faircredit.org.