Some Credit Counseling Agencies Not Reputable Says LSU AgCenter Family Economist

Jeanette A. Tucker  |  4/19/2005 10:28:36 PM

News You Can Use For June 2004 

Making ends meet can be difficult even in the best of times, but the added impact of job loss, medical bills or divorce can be devastating. At these times consumers often seek help from credit counseling agencies (CCAs) in managing debt. "But be cautious," advises LSU AgCenter family economics professor Dr. Jeanette Tucker.

Many credit counselors provide valuable advice, education and assistance to those seeking to better manage their debts. Many, if not most, CCAs operate honestly and fairly.

An increasing number of complaints to federal and state agencies, however, suggests that some agencies are engaging in questionable activities, according to the family economist.

"The Federal Trade Commission has identified deception by CCAs about the nature and cost of their services as their greatest concern," Tucker says. She lists certain deceptive practices:

• Misrepresentation of fees or "voluntary contributions," including failure to disclose that the CCA may retain certain payments consumers make on their Debt Management Plans (DMPs).

• Promising unattainable results, including lowering consumers’ interest rates, monthly payments or overall debt by an unrealistic amount or exaggerating the amount of money consumers will save by signing up for a DMP.

• Abuse of nonprofit status. Some CCAs appear to use their 501(c)(3) status to convince consumers to enroll in their DMPs and pay fees or make donations, indicating that the "donations" will be used to defray the CCAs expenses. Instead, the money may be passed through individuals or for-profit entities with which the CCA is closely associated.

• False advertising of credit counseling services. Some CCAs claim to provide advice and education to consumers, when they may enroll them in DMPs without actually providing counseling.

• Failure to pay creditors in a timely manner or failing to pay creditors.

• Failure to abide by telemarketing laws. CCAs should comply with all aspects of the Federal Trade Commission’s Telemarketing Sales Rule, including the National Do Not Call Registry.

• Failure to comply with privacy and security requirements under the Gramm-Leach-Bliley Act.

Tucker says the Federal Trade Commission has pursued a vigorous enforcement program to stop fraud and deception by those who claim to be able to resolve consumers’ financial difficulties. It has also provided extensive education to help protect consumers from credit counseling and credit repair scams. The Federal Trade Commission and the Internal Revenue Service have jointly issued the following tips for choosing a credit counseling organization:

• Beware of high fees or required "voluntary contributions" that, with high monthly service charges, may add to your debt and defeat your efforts to pay your bills. It is illegal to represent that negative information, such as bankruptcy, can be removed from a credit report. Promises to "help you get out of debt easily" are a red flag.

• Check that the organization will help you manage your finances better through counseling and education.

• Carefully read through any written agreement from a credit counseling organization. It should detail the services to be performed, the payment terms for these services (including their total cost), how long it will take to achieve results, any guarantees and the organization’s business name and physical address.

• Make sure your creditors are willing to work with the agency you choose. If they are, follow up with those creditors regularly to make sure your debt is being paid off.

• Check with state agencies and your local Better Business Bureau to find out about a specific credit counseling organization’s record.

Additional information on how to choose a credit counselor, take control of one’s finances or avoid scams can be obtained from the Federal Trade Commission’s Web site at  or by calling toll-free: 877-FTC-HELP (877-382-4357).

For information on related family and consumer topics in family, housing and nutrition, visit the FCS Web site at
/Extension/Departments/fcs/.  For local information and educational programs, contact an extension agent in your parish LSU AgCenter office.


On the Internet: LSU AgCenter:
On the Internet: Federal Trade Commission:
Source: Jeanette Tucker (225) 578-1425, or

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