Questions to Ask a Credit or Debt Counseling Agency

Before agreeing to work with a credit counseling agency, make sure it’s the right outfit: Ask these questions and use this advice on how to interpret the answers you get.

1. Can I get information on your agency and programs? Don’t be pressured by an agency that insists on signing you up on the spot, over the phone.

2. Do you pay referral fees to others who refer consumers for counseling? If the agency pays finders’ fees for new business, it may be more interested in getting people on payment plans than in providing assistance or education.

3. What should I do if I cannot afford the minimum payment? Ideally, an agency should offer a hardship program, rather than telling you your only option is bankruptcy.

4. What kind of training do you have that makes you qualified to assist me? Although it’s hard to judge credentials, some counselors are really nothing more than telemarketers who are paid to sign up as many people as possible for repayment programs.

5. What security measures do you take to protect my information? Your personal and account information is extremely confidential and should be carefully protected against unauthorized access.

6. Can I get up-to-date, regular reports on the status of my accounts? You need to be able to tell if the counseling agency is, in fact, paying all your creditors on time. Find out how you will be able to monitor your account.

7. Can you answer my general questions, even if I am not in your repayment program? A counseling agency should provide a basic level of assistance, even to people who are not enrolled in a payment program.

8. What kinds of educational programs and services do you provide? Educational programs are important to help you solve your financial problems and learn positive new habits. You can tell a lot about an agency by the quality of its educational materials and services.

9. Is there a minimum amount of debt I have to have in order to work with you? Some agencies will turn you away if you don’t have “enough” debt. But what may not seem like a lot to someone at an agency may be unmanageable for you! You want an agency that will work with you no matter what your situation.

10. What happens if some of my creditors will not participate with you? Some agencies will only accept accounts from creditors who will make a contribution to them for handling your account. A good counseling agency will help with all your debts, regardless of whether the creditor contributes. (Keep in mind that the counseling agency won’t be able to negotiate better terms unless the creditor agrees. But it should include the debt in the total monthly payment as a courtesy to you.)

11. Is there a mandatory upfront fee? How much is it? Some agencies charge mandatory upfront fees -- $250 or more. That’s a lot of money for someone who is having trouble paying their current bills.

12. Will you sell my name or address to outside parties? Your information should always be kept confidential between you, the agency, and your creditors.

13. How often do you pay creditors? This is a critical question. The faster the agency pays creditors, the faster your payment will be credited. Slow payments by the agency can mean late fees or higher interest for you.

14. Who will help me if there is a problem with my accounts or creditors? If problems arise, you want to know the agency will help resolve them.

For more information on choosing a debt counseling agency, and for warnings about other types of credit-related scams, visit:

This article was reprinted by permission of Financial Literacy Center, Inc. All rights reserved. Copyright 1999 Gerri Detweiler, Marc Eisenson, and Nancy Castleman.

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