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Debt Management Company

Debt Management

Choosing a debt management company

One of the most important decisions you'll make in dealing with your debt is choosing the right debt management company. The rule of thumb when it comes to doing this is to be very, very cautious. The fastest growing area of complaints received by the Federal Trade Commission is to do with the credit management industry. Many debt management companies and counsellors have unenviable reputations, or pending legal actions against them. Use the tips below to help you find a reliable and trustworthy debt management company.

Do you need a counselor?

Ticks!


First of all ask yourself if you need the help of a credit counselor. Try calling your creditors yourself, explain why you're having difficulty paying off the debt and ask if it is possible to arrange a new payment plan to suit you. The worst they can say is no.

Look for a personal referral from someone you trust

Many universities, housing authorities, credit unions and military bases offer non profit credit counselling services. Ask your bank manager, family and friends for advice on who to trust.

Shop around

Check services and fees thoroughly at a number of companies. See what each one offers and compare them. Never trust a company that refuses to send you free information without first getting your personal banking details from you.

Complaints

When you've narrowed down your list of potential debt management companies check their track record with the Better Business Bureau. Also check with state consumer agencies or the state attorney general's office to see if there are any pending legal actions against the company.

Location

Most credit counsellors offer advice through a local office, over the phone or on the Internet. Find a company that offers advice in person.

Certification

A reputable debt management company will be certified by an independent, third-party association such as the Council on Accreditation. The individual counselors should also be certified and members of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

Services offered

Look for a company willing to spend time with you to discuss your total financial situation. They should be able to advise you on managing your debt, developing a budget, and putting a personalised debt management program into practice. Initial sessions typically last about an hour with follow up sessions possible. Don't let the agency put pressure on you to make quick decisions.

All credit management companies should examine your personal financial situation and offer you a tailor-made debt management program. Avoid any company offering you a generic plan. Companies should also teach you about budgeting and money management before offering you any debt management plan. Be sceptical about any plan that seems to offer and an instant solution or is too good to be true. Debt problems are complex and there's no easy fix.

Costs

Look at the fees charged by the debt management company in close detail. Some charge application fees while others charge nothing initially but build up massive fees over time. Everything should be disclosed upfront. Avoid any company that refuses to explain their costs. Don't be afraid to ask for a clear written breakdown of costs and be wary of credit counselling firms that charge high up-front fees or put pressure on you to pay 'voluntary contributions'. Look beneath the surface of non profit companies - they're not necessarily cheap or good.

Regulation and funding

Ask the debt management company where their funding comes from (it's usually a big bank or credit card company) and who regulates them. If they aren't forthright with the information just walk away.

Payments

Your creditors have to accept you into a program before the credit counselling company can take any payments from you. If you're unsure check with your creditors yourself before making any payments to the debt management company.