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What the Federal Trade Commission
says about: Credit Counseling

Credit Counseling: If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization. Many credit-counseling organizations are nonprofit and work with you to solve your financial problems. But be aware that, just because an organization says it’s "nonprofit," there’s no guarantee that its services are free, affordable, or even legitimate.

In fact, some credit counseling organizations charge high fees, which may be hidden, or urge consumers to make "voluntary" contributions that can cause more debt. Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

Reputable credit counseling organizations can advise you on managing your money and debts help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Lawgistix’s Opinion on Credit Counseling

We believe credit counseling would be a far more tangible method of eliminating your debt if not for these issues:

1. We have seen many reports that indicate the failure of a consumer to finish a debt consolidation plan may be as high as 95%. This means a debt consolidation plan may only have one (1) chance in twenty (20) that it will work for you. We don’t like those odds.

2. Many creditors only reduce the interest rates from a default rate of about twenty-nine percent (29% APR) to an average of nineteen percent (19%). The small reduction of interest is not sufficient to provide any monthly payment relief for the consumer and may also result in the repayment plan being extended years longer than what was originally disclosed. We could surmise that the high percentage of consumers in debt consolidation plans quit the program when they discover their term has been extended by several years.

3. While the past trend for creditors was to remove late charges and over-the-limit fees when a consumer entered a credit-counseling program, many creditors are now rejecting such requests. In addition, a consumer’s credit report will probably reflect that they are in credit counseling, either under each account and/or the placement of a derogatory code. Consider that mortgage companies and other lenders may not approve loan requests for consumers in credit counseling or charge them much more interest if approved. Thus, the extended time for the program to be completed reflects derogatory credit on credit reports for a much longer term than the consumer expected.

For more information about Credit Counseling compared to Lawgistix Debt Settlement please call us at 1.800.535.5179 .