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Debt Counseling Assistance :: American Consumer Credit Counseling
American Consumer Credit Counseling:
The Downside of American Consumer Credit Agencies and Counseling Services
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In a nation of ever-increasing consumer debt loads, American consumer credit counseling services are doing a booming business.
However the questionable business practices of some newer organizations are causing major problems in the industry.
The first credit-counseling agency in the U.S. opened its doors in 1951 with a goal of helping debt-ridden consumers avoid bankruptcy and helping lenders recoup at least a portion of the money owed to them by strapped consumers. And for decades, nonprofit credit-counseling services achieved those goals.
But over the last ten years, there's been a drastic change in the industry - the emergence of new agencies that seem more interested in charging high services fees and marketing high-interest debt-consolidation loans than in helping their clients and consumers return to solid financial stability.
A recent report from the National Consumer Law Center, titled "Credit Counseling in Crisis," describes numerous abuses by some of the upstart services, including price-gouging, excessive fees, back door commissions and deceptive practices.
The report also calls for legislation to address those problems. To learn more about the report and some of its findings, keep reading.
Complaints
As the number of debtors in debt-management plans increases, so do complaints about business practices in the industry. The Better Business Bureau reported in 2002 that such complaints about credit counseling agencies rose to 1,480 and that's up from 261 in 1998.
Hidden Fees
Over the past decade, many American consumer credit counseling companies have gotten into trouble for charging consumers excessively high service fees for their services. These fees are either hidden into the monthly payments or taken up front.
Issuer Initiatives
Issuers, meanwhile, are tightening their own criteria for dealing with credit-counseling services.
For example, some issuers like Sears, MBNA and Bank One are paying the counseling services based on performance – so, by completed and successful payment plans.
They're also insisting that counseling services be accredited and counselors be certified.
Many creditors won't work with American consumer credit counseling companies that sign up people who don't actually need debt repayment schedules or reduced interest rates.
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