Credit Counseling Agencies
Profit vs Non-Profit Agencies

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Profit vs Non Profit

Credit Counseling Agencies Regulators and legislators are taking steps to protect consumers from unscrupulous credit counselors, there is a growing concern about the escalating debt settlement industry.

These companies, virtually all for profit, differ from the non profit credit counseling agencies that enroll debtors in repayment plans. Instead debt settlers try to negotiate a reduction in the amount of debt owed to a creditor, usually a credit card company.

A negotiator might ask a credit company to accept 40 cents for every dollar owed which is more than the credit company would receive if the debtor filed bankruptcy.

Credit Counselor Agencies and Lawyers

For years, lawyers and credit counselors have done debt settlements for cash strapped clients on the brink of bankruptcy. although the debt settlement industry is only about 5 years old, with an estimated 300 companies nationwide, according to the U.S. Organizations of Bankruptcy Alternatives, an 8 month old trade association with more than 50 debt settler members.

Regulators and consumer advocates warn that the practices of some of these companies can leave consumers deeper in debt, harassed by bill collectors, and with a worse credit record.

Business models for debt negotiations can vary, but they often work as follows: Consumers give a debt settler power of attorney in order to negotiate with their creditors. Debtors than will contribute money into an account building up cash that will be offered to a creditor as a settlement. Debt settler fees are also extracted from the very same account. Some companies may charge an upfront fee along with a monthly maintenance fee. If a settlement is reached, the company may also charge a percentage of the amount of the forgiven debt, in some cases up to 25%.

Even if a negotiator reaches a settlement with the credit company it is possible that when all fees are factored in, a debtor may pay more to the debt settler than they initially owed their creditors.

Bottom Line - There are many above board Credit Agencies available, but you must do your "due diligence".

Credit Counseling Agencies

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