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Chapter 4: Credit Card Debt Services

Evaluating Credit Counseling Agencies

These are excerpts from the Association of Independent Consumer Credit Counseling Agencies (AICCCA) standards and best practices. Review these points and use them to evaluate the credit counseling agencies you talk to about your credit situation.
Counselors
1) Must be properly trained and qualified to provide clients with a quality financial education experience.
2) Must be certified by an organization acceptable to the Association within 12 months of the date of hire.
3) Must provide a comprehensive, one-on-one money management counseling interview following a prospective client’s request for counseling services, and provide a written assessment and action plan to the client as applicable to the service provided.
4) Counselor compensation cannot be based on outcome of counseling process.

Fees
1) All services must be available to the public regardless of ability to pay and at no time should a person be refused service due to an inability to pay.
2) Fees to clients should be as low as possible, and should consider the financial situation of the client.
3) Agency may not charge a fee for credit repair nor be affiliated with an organization that does.
Business Practices
1) Any materials that discuss debt management plans must include a disclosure regarding the agency’s dual role in serving the needs of consumers and creditors.
2) Prior to the receipt of the client’s first deposit, an agency must provide each client enrolling in a debt management plan with a reliable estimate of the length of time it will take to complete the plan. This must be provided in writing and identify all creditors included in the plan, the amount owed to and the proposed payment to each creditor, and the anticipated number of months to liquidate the debt.

Client Funds
Agency must carry adequate insurance or bonding on all employees with access to agency or client funds, with coverage based on the level of funds handled by the agency. Member agencies must add the Association to their respective Certificate of Insurance bonding policies for the purpose of receiving notice of any potential lapse in coverage due to non-payment of premium. All client funds must be kept in a separate trust account in an FDIC insured, or equivalent, bank or financial institution.

Best Practices Requirements
The following “Best Practices” are required to be followed by every member agency to ensure integrity, fairness and professionalism in the delivery of those services. Where specific limits are stated they are provided as upper limits that are acceptable, while improved performance is encouraged.
1) FEES – Maximum fees for the “set-up” of a Debt Management Plan (DMP) are $75. Maximum fees, or requested donations, for the monthly maintenance of a DMP are $50.
2) DISBURSEMENT OF FUNDS – Client funds received for a DMP must be disbursed to the creditors no later than 15 days from receipt of valid funds, or by scheduled disbursement date, whichever is greater.
3) TRANSMITTAL OF FUNDS – Member agencies must utilize available electronic payment processing in remitting funds to creditors.
4) CLIENT/CREDITOR ACCEPTANCE – Debt Management Plans should be established only when they are appropriate, and advantageous to the client. No client will be refused a DMP for minimum balances. No creditor will be excluded from a DMP unless it is beneficial to the client.
5) INCEPTION DATES – Clients must start a DMP, and make their first plan payment, within six weeks of agreeing to the service. Proposals must be issued in a timely manner, but no later than prior to the first payment date.
6) COUNSELING – Appointments for a counseling session should be scheduled within 2 business days of receipt of the request.
7) COMPLAINTS – All complaints should be researched and responded to within 5 business days.

Here is a link to the Federal Trade Commission’s guidelines for selecting a credit counseling organization.

Can this type of debt service fit into your credit-card-debt relief plan?
For the long term, if you have enough money to pay your credit card and other debts, this credit card debt management or debt counseling can put you in control of your finances. You'll get a debt management plan that will bring you credit-card-debt relief over a relatively long period of time. Your good credit rating will get “bruised” in the short term, but survive the process.
In the short-term you get control of your finances, and you regain your peace of mind.

What can go wrong? Without your knowledge payments can be missed, not mailed, not mailed in time, lost in the mail, etc. with the end result being one of your credit card companies raising your interest rate and reporting a late payment or payments on your credit report. Be sure you will have enough money in your monthly budget over the coming months, and years, to complete a credit card debt management or debt counseling program. Otherwise, credit card interest and penalties may increase the debt you have attempted to pay down.

There are other concerns when a borrower is faced with one large payment to one creditor rather than many smaller payments to many creditors, if a payment gets missed or is short, late fees and/or penalty charges may apply. These additional fees may make it more and more difficult for the borrower to catch-up.  With several smaller payments directly to creditors there are more options.

You need to evaluate these resources carefully. (See assoc. best practices, etc.) Insist on a monthly accounting from your management or counseling service of all payments made on your behalf including the amount and timing of each payment.  Work with these debt management or counseling services to get high interest rates reduced at the beginning of the program, and continue rechecking over the course of the program for opportunities to get interest rates reduced.

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