Cincinnati Post: Wolves in Credit Counselors' Clothing

April 26, 2005 – You see the ads every day: in print, in your e-mail box; on the radio and television. Everywhere it seems there are promises to fix your debts, specifically your unsecured credit card debts. You can't really avoid the ads, but you can be wise enough to not fall for them.

No one can "fix" your debts for you. Only you can do that.

Sure, there are some reputable credit counselors out there who can help you avoid filing for bankruptcy, but none of them have magic wands.

And my experience is that the reputable credit counselors don't have million-dollar advertising budgets.

Only last month, the Federal Trade Commission announced settlements with three debt-counseling agencies that they said had bilked consumers out of more than $100 million, a scam that is becoming increasingly common.

The three companies that were the subject of this most recent FTC action promised to help consumers manage their debts but, according to the FTC ruling, only made their problems worse.

Clients of the California-based National Consumer Council, Florida-based Debt Management Foundation Services Inc. and Massachusetts-based Better Budget Financial Services Inc. paid thousands of dollars to keep bill collectors at bay, but instead clients saw their debts, interest rates and late fees increase as the three companies did little to help.

Some consumers were forced to declare bankruptcy when the companies, promising to make their debts go away by paying only pennies on the dollar, told them to stop paying their bills. But then they failed to negotiate on their behalf.

The companies agreed to give back a total of more than $25 million to consumers. Two of the companies in this action are in the process of being shut down. Remarkably, none of the owners face jail time, as the FTC does not have criminal authority.

So how can you know who's reputable and who isn't?

Easy. Memorize these letters CCCS. The most reputable credit counseling organizations are certified through the National Federation of Credit Counselors giving them the right to use CCCS in their name (Consumer Credit Counseling Services).

Visit www.nfcc.org or call (800) 251-2227 to be connected to the CCCS office closest to you.

Of course there are reputable independent credit counselors that truly help their clients. Finding them takes some effort. Here's a good clue: If a company insists on high monthly fees and guarantees to get rid of debts, be suspicious. If the company calls itself a debt negotiator, debt wizard, debt magician, debt eliminator or any moniker that suggests an easy way out, they're probably phonies looking to rip you off.

Credit counseling is not a neat way to reduce your interest rates and get out of paying your bills.

However, if you are behind on your payments and your credit report is already tarnished, credit counseling might be the life raft you need. In that case it can't hurt to give CCCS a call.

Mary Hunt is the creator of The Cheapskate Monthly newsletter. You can e-mail questions or tips online at cheapskateunitedmedia.com or write Everyday Cheapskate, P.O. Box 2135, Paramount, Calif. 90723.