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Credit counseling myths, facts

By Marcie Geffner · Bankrate.com
Monday, September 3, 2012
Posted: 6 am ET

Large numbers of consumers who might benefit from credit counseling aren't getting help due to serious misperceptions about this type of financial assistance.

That's the principal finding of a recent online poll of more than 2,000 people.

The poll, conducted in July by the nonprofit National Foundation for Credit Counseling, or NFCC, found that:

  • Forty-six percent of respondents where confused about where they could find "real help."
  • Thirteen percent believed their problems were "beyond help."
  • Twenty-four percent thought they wouldn't be able to afford credit counseling.
  • Ten percent felt they could resolve their situation on their own.
  • Six percent were "tired of trying" to find help or remedy their difficulties.

In a statement, NFCC spokeswoman Gail Cunningham characterizes these findings as "disturbing" in multiple ways.

"Many well-meaning consumers have been duped by unscrupulous businesses which charged them high fees, yet delivered little if any real help. Unfortunately, these types of activities not only tar the sector, but prevent consumers from seeking the help they need," Cunningham says.

In fact, services provided by NFCC member counseling agencies, among other reputable organizations, contrast starkly with such misperceptions.

NFCC agencies, which helped more than 3 million people last year, must obtain and maintain accreditation by an independent third-party, not-for-profit accrediting organization and must be re-accredited every four years. Credit counselors must understand the applicable theories, principles, issues, counseling techniques and forms, and demonstrate their knowledge through a test. Most NFCC-affiliated credit counseling programs are free and open to the public, the foundation says.

"The NFCC wants to send a loud message to consumers who are experiencing financial distress, and that message is that legitimate help is available," Cunningham says. "People owe it to themselves and to their family to reach out to a trained and certified counselor for a review of their situation."

Follow me on Twitter: @marciegeff

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19 Comments
Rod
September 06, 2012 at 11:27 am

I saw the credit counseling story by Janna Herron(Bankrate.com) regarding a 76 yr old with $20,000 of unsecured debt and $3400.00 in monthly income. Part of what Janna said about counseling is true however, bankruptcy allows him to keep the $8,000 mobile home, and his few personal belongings. Remember in his case its UNSECURED debt. As a recently retired banker, I would wonder about the credit card company that would allow $15,000.00 based on assets and income. Janna is just one more young finance person who has drank the coolaid and worried that she's working for the Financial Industry where they don't allow their people to whisper the work Bankruptcy. Whether or not this gentleman signs up for the counseling or goes bankrupt he's on a cash basis from here on out. If he pays the debt he has nothing left for his relatives. Seniors bankruptcy isn't bad it's more often than not that the stress will be relieved and you will have more money in your pocket. Talk to a bankruptcy Attorney before the counselor. Counselors work for the companies they collect for not you.

Cher
September 06, 2012 at 10:27 am

We've had an extraordinary amount of tragedy in our family (long story) resulting in my putting my Moms savings into a safe deposit box where it ended up being stolen. (it does happen)We are using my MOms monthly checks totally to pay off credit card debt and mine as well. I try to work with these companies but the debt increaes every year to the point we don't have enough money to eat. (we get 200.00 for food ea month but its not enough. I refuse to stop paynig my debt or go bakrupt so ea month I pay the bills before anything. I have parrots and a dog that I care for and would sooner die than give them up. I am multiply handicapped and my Mom is 87. I am petrified of what is going to happen when she dies let alone in a month or so as with whatever help credit cards have offered and choosing house and car insurance at the lowest rates. On SSI I am not able to take in renters or have more than 2000.00 in assets of which I have none; am unable to save. We don't have enough money to buy fruits, vegatables, etc. ea one costs practically a dollar each. We et chicken every single night. If my credit cards were taken away I would not be able to buy certain necessities that we must hve once in a while or pay for repairs. Our house is in bad need of repair too. I dont think anyone can help us at this point so your article is right. How could I pay a fee when my health insurance is no longer paying for vital medications for me? I feel totally helpless in this sitution and would give anything if I could find a reputable job at home. Believe me I have been trying. My health is worsening all the time. (I have several medical degrees and avian cert as well, and am not a lazy person on teh govt payroll)

tammy
September 06, 2012 at 10:03 am

Randy,
Who is cesi?

GK
September 06, 2012 at 7:54 am

My husband and I have done Consumer Credit Counseling in the past. They are a non-profit and they negotiate with the companies on the interest rate. Some companies negotiate, some don't. We had some companies that totally dropped all interest while others cut it in half, but as I said, some of them didn't budge. CCCS will also sit down with you and your spouse to work out a budget or whatever needs that you have. They do charge a small fee; when we used them, around 6 years ago, the fee was $25/ mo. which we paid with the payment. The companies out there that promise to make your credit better and you don't have to re-pay everything... RUN!!! FAST!!! Remember, if it's too good to be true it probably is. In my opinion CCCS is one of the best solutions if you feel like there is no light at the end of the tunnel.

Jessie Williams
September 06, 2012 at 7:43 am

We just got started with Care One. So far, so good. Are they a reputable company?Anyone use them?

randy
September 06, 2012 at 5:05 am

we went under debt consolidation with cesi , who in turn did credit counseling with us as well i found them to be very reputable and helpful as well as their fees being very reasonable. do not give up hope if you are in debt talk to a lawyer if need be that specializes in bankruptcy first cause you might not have to go that route they usually can give you alternatives as long as they are good lawyers.

Lee Marchi
September 06, 2012 at 12:49 am

How do I know if the agency that is helping me to get out of debt is accredited. They said they were accredited by the Better Business Buerea. Also is there any thruth to the fact the my credit will be restored? and how does one do it. we still have two more years to pay into this company. and what they do is negotiate with the interest and try to lowerthe pay off figure. They are Santa Clause so there must be a fee and is it regulated by the government.

jim
September 06, 2012 at 12:17 am

We were of the lucky ones who got out of debt despite this bad economy and what seemed to be no place to turn. With many difficult years, losing a secure job and seeing the interest rates on our debt soar, things finally went our way. For years, dressed like paupers and living an austere existence, I held onto whatever oportunity I could grab, as I forged ahead and worked like a slave to pay these bankers. You have to understand, people like me were lied to by every credit couselor and financial institution we encountered through the years. For me that goes back to 2007 - and now my family is finally free. Today, I trust no one. If there are legitimate people out there in the credit counseling industry who want to help, I have yet to find them. I do not recommend how I righted my ship, but it was the only way that I could see - five lost years of hard labor, and now, with rebuilding of a life to follow. God help anyone who is walking the same path.