Credit Counseling - What To Do About the Bad Actors in the Industry

By: on 2005-04-19
Ask Phil Bradford

For years credit counselors have provided excellent and honest service to consumers experiencing financial difficulties. The services of credit counselors have helped tens of thousands of people to pay off their debt, avoid bankruptcy and clean up their credit ratings.

Unfortunately, the very success of the credit counseling industry has attracted the attention of companies that are not reputable players in the credit counseling industry. These shady dealers have taken advantage of trusting consumers and caused them many problems. Unfortunately for the honest companies in the credit counseling industry, these few bad apples have tarnished the reputation of all credit counseling services.

In many markets, the Better Business Bureau has unfairly warned consumers away from credit counseling services due to the negative experiences some consumers have had with the less than reputable players in our industry. It is difficult to see the reputation you have worked so hard to build up through years of honest hard work destroyed by a few shady credit counseling companies who chose to take advantage of the trust placed in them by the consumers they purported to serve.

The entrance into the credit counseling marketplace of companies who do not have the best interests of the consumers at heart means that those consumers in need of credit counseling must be vigilant in their attempt to weed out the bad characters from the honest brokers. Most credit counselors provide excellent service to consumers at reasonable fees. There is no room in our industry for shady characters, and we must be careful to police our industry as best we can.

We always urge consumers to shop carefully and look out for the classic warning signs that they are dealing with a credit counselor who is not reputable. Some of these warning flags include:

Excessive Fees

Excessive fees remain one of the biggest problems plaguing the credit counseling industry. Some credit counselor charge monthly fees that can run as high as 10% of the payments made by customers. In some instances, they may also fail to disclose that the first payment the consumer makes will be retained as an enrollment fee.

Demanding that the Consumer Sign a Contract Up Front

This is a big warning flag that a consumer has found a less than reputable credit counselor. A quality credit counseling company will not pressure a consumer to sign a contract until all details are clearly spelled out.

Pushing Credit Counseling for Everyone

This is probably the most pervasive abuse practiced by the less reputable players in the credit counseling industry. The shady characters in the industry see every consumer the same - as a great big dollar sign. The reputable credit counseling services examine the unique circumstances of every consumer that comes through their door. Some of these consumers truly need the services of a credit counselor to deal with their debt. Others will be able to take simple steps on their own to deal with their bills and re-establish their credit. A good credit counselor not only knows the difference but communicates it effectively and serves only those consumers who truly need their help.

Bait and Switch Tactics

Every shopper is familiar with the bait and switch game. That great new TV is advertised for $50 but when you arrive at the store they just sold the last one but there's this even greater TV for $200. In the credit counseling industry, bait and switch takes the form of replacing the low monthly payments used to snare consumers with higher payments after a couple of months. The non-reputable credit counselor will claim that the creditors are demanding a higher payment, but often the credit counselor will be using the extra money to line their pockets.

It is unfortunate that a few bad players have sullied the reputation of an entire industry. By warning consumers to avoid these disreputable credit counseling companies, legitimate credit counselors can begin to recover their lost reputation and continue to serve a client base that is more in need of credit counseling than ever.

Last Updated on: Tue, 19 Apr 2005

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