Credit Counseling Agencies Push Consumers into Debt Management Programs

As a follow up to the credit counseling scams article, these nonprofit agencies circumvent the statutes and regulations put in place by the FTC by both funneling money into other for-profit companies, and by pushing consumers into debt management plans that they neither need nor fully understand.

These counseling call-centers are designed to charge high interest, hidden fees to any consumer who will buy into their debt management plans. This new wave of nonprofit credit agencies abusing their consumer has popped up since the 1990’s.  Before that time, the nonprofits were knowledgeable places that only pushed debt consolidation to individuals with severe debt.  Otherwise, the agencies were primarily counseling centers.

More recently, the credit card agencies give the debt consolidation agencies a percentage of the debt they collect from the individuals.  This new way of viewing the debt counseling industry has turned the industry from counseling/advice based to profit based.

With all of these new counseling agencies, and now with the nonprofits abusing the system, the FTC is working to provide new regulations and standards.  In the meantime however, the warning is the same, research debt consolidation, talk to the counselors, but make sure you are making an informed decision. ■