| Be Cautious of Credit Counseling & Debt Management Claims During Michigan’s Economic Woes
Sunday, January 20, 2008
SOUTHFIELD, MI – Layoff and foreclosure notices will continue to loom in Michigan’s future as the state’s economic woes continue into 2008 according to a University of Michigan forecast that projects the state losing another 51,200 jobs this year. According to unemployment statistics released on December 21, 2007 by the U.S. Department of Labor, Michigan has the highest rate of unemployment in the country at 7.4%. According to the University of Michigan forecast that number could increase to 7.7% in 2008 further increasing credit and debt problems for many families.
In these tough economic times, your local Better Business Bureau advises consumers to be cautious when dealing with companies offering credit counseling and debt management services. Choosing a bad credit counselor could get you deeper into debt and further increase your financial troubles.
The BBB warns consumers to beware of companies that offer debt management services that aren’t licensed in Michigan or that may have an unsatisfactory rating with your Better Business Bureau. One example is Clear Your Debt, LLC of Austin, Texas. The Better Business Bureau has received complaints and inquiries regarding this debt management company from Michigan residents and consumers across the country. Based upon BBB files, this company has an unsatisfactory record with the BBB due to a pattern of complaints and it has failed to correct the underlying reason for the complaints. A review of state records by the Better Business Bureau Serving Eastern Michigan shows that Clear Your Debt, LLC is not listed as a licensed debt management company authorized to do business in Michigan.
Consumers have complained to the BBB that they are not notified that they are actually enrolling in the company’s debt settlement program. Consumers are allegedly told they are merely filling out applications for the company to review whether the individual is a qualified candidate to receive the company’s services. Consumers contend that the company than makes debits from their checking accounts without consent or knowledge. Consumers have also reported to the BBB that while Clear Your Debt, LLC has been debiting their bank accounts, their creditors continue to contact them demanding payment. Some consumers have informed the BBB that they have had legal action taken against them by creditors because of Clear Your Debt, LLC’s failure to provide promised services.
“If you decide to work with a credit counseling or debt management company, spend some time researching your options and take care to select a reputable company,” stated Tim Burns, Public Affairs Director for the Better Business Bureau Serving Eastern Michigan. “Your goal should be to find a credit counselor that has satisfied clients, offers personalized service from trained counselors, can educate you how to make appropriate choices, and will provide you with the tools you need to achieve financial security.”
A debt management plan is when an approved credit counselor negotiates with your creditors to reduce interest rates, late fees, penalties, and other aspects of your debt in exchange for a consistent payment schedule by the debtor. Instead of writing several checks to various creditors each month, the debtor makes one payment to the credit counseling agency. These payments are than used to pay creditors according to a payment schedule created by the counselor in consultation with the debtor they are representing.
A successful debt management plan generally takes 30-60 months to complete.
Your Better Business Bureau offers the following tips for selecting a credit counseling agency that provides debt management services:
Is the agency licensed and accredited? In Michigan, credit counseling agencies that offer debt management plans and services must be licensed by the state’s Office of Financial & Insurance Services. Do not hire an organization that has not fulfilled state requirements. A list of licensed debt management companies is available online at: www.mich.gov/documents/cis_ofis_debtlist_25540_7.pdf. Consumers can call toll-free 877-999-6442 to check out a company’s licensing if they don’t have Internet access.
Also, ask if the firm is a member of the National Foundation for Credit Counseling (www.nfcc.org) or the Association of Independent Consumer Credit Counseling Agencies (www.aiccca.org)and double-check that information at the respective Web site. Agencies that are members of these organizations must adhere to strict standards of professionalism and use only certified credit counselors. Also check to see whether the company has been Accredited by the Better Business Bureau by calling 248-644-9100 or visiting www.bbb.org.
Are services personalized? A cookie-cutter approach most likely will not address your financial situation. Find out if the counselor will devise a plan tailored to fit your personal circumstances. Also, think beyond your immediate credit/debt problems and find out if the agency will offer you advice on avoiding problems in the future.
Gain a clear understanding of the services offered. You should seek an organization that offers a range of services. For instance, ask if the services include educational classes or counseling and on what subjects. Will you have the opportunity to discuss your financial situation with a counselor and receive assistance in developing a personalized plan? What sort of services do they provide regarding debt repayment plans?
Get verbal promises in writing. Only do business with agencies that offer formal written agreements or contracts. Carefully read through the terms of agreement or contract. It should describe in straight-forward fashion the services to be performed; the payment terms for these services, including total cost; how long it will take to achieve results; any guarantees offered; and, the counselor's name, business name, address and contact information.
Fees. Get a clear presentation of the fees you will be charged. If there are fees (set-up fee, monthly service charges), the agency should explain what they are based upon. Consider the total of the various fees; when added to your monthly debt, will the cost defeat your efforts to pay down your debt?
Ask how the agency is funded. Most credit counseling agencies are partially funded through voluntary contributions from creditors who participate in Debt Management Plans. (Creditors have a business interest in receiving their payments, so most of them are willing to help support participating credit counseling agencies.) Go elsewhere for assistance if the credit counseling agency refuses to discuss its funding sources. If the agency claims to be tax-exempt or not-for-profit, confirm that with the Michigan Attorney General’s Office. Some credit counseling organizations using questionable practices have sought tax-exempt status in order to circumvent consumer protection laws.
Are budget and credit education opportunities offered? Reputable organizations are willing to help you manage your finances through counseling and education. Ask if the agency offers workshops or educational materials. Are they available for free? Are they accessible online or can the materials be mailed to you? If the agency insists that a debt management plan is the only option for clients, look elsewhere.
Check their complaint records. Contact your Better Business Bureau (www.bbb.org) for a reliability report. If consumers have filed complaints against the firm or if the counselor has not been responsive to complaints; that could indicate problems.
“Getting out of debt easily is rarely an easy task,” noted Burns. “Avoid companies that promise a quick and easy way to fix your credit problems. Look for BBB Accredited Businesses that have agreed to abide by the Better Business Bureau’s standards for trust in the marketplace.”