Credit counseling agencies can be a useful tool and more and more people are learning that obtaining financial aid from one of them can be priceless. Subsequently, the number of credit counseling agencies is growing rapidly. While some are legitimate, it’s a sad fact that several agencies, even big name companies, will take your money and ruin your credit rather than fix it.
A woman who works for my neighbor said she signed up with a credit counseling agency to get her finances in order. After she divulged a ton of personal information the company claimed they would be able to fix her credit in three years. She decided to go for it, and signed up with the company. Six weeks later she discovered her account had been transferred to another company, which she had never heard of. Then, within two months of that notification, she received a call from an attorney who said he had taken over her account. A few weeks later she started to get letters from her credit card companies claiming she had missed payments. Turns out, the attorney failed to make payments and she ended up getting socked with late fees and her credit score took a nose-dive.
If you look in the Yellow Pages you’ll find a plethora of credit counseling companies, the problem is not all of them are licensed. Lo and behold, after a ton of phone calls and countless hours spent researching material on her own, my neighbor’s employee discovered none of the companies she worked with had a license. (In most states it is illegal for a credit counseling agency to operate without a license.) When she contacted our state’s Department of Financial Institutions she was told that the state receives hundreds of complaints every year from people who are taken for a ride by unlicensed agencies who fly under the radar.
To protect yourself, it is a good idea to do your research on a credit counseling agency prior to signing on the dotted line. (My neighbor’s employee says she could have saved herself a lot of time, energy and stress had she done her research prior to signing a contract.) A good place to start is by visiting your state’s Department of Financial Institutions website—most provide a list of licensed agencies.