National Legal Debt Centers Issues Consumer Alert

Beware of Credit Counseling Scams

(PRWEB) July 5, 2005 -- National Legal Debt Centers, Inc. (www.nldc.us) American consumers are being duped and deceived daily, by unscrupulous predators pretending to be credit counselors. More than 75% of the credit counseling services operating in Massachusetts are doing so illegally, according to a recent report from a Senate committee. (From Todays Seniors Network article below.)

Two years ago in another report detailing the severe threat to consumers from a new generation of credit counseling agencies, the National Consumer Law Center (NCLC) and Consumer Federation of America (CFA) stated that Credit Counseling is in a Crisis. The comprehensive study found that, unlike the previous generation of mostly creditor-funded counseling services, these new agencies often harm debtors with improper advice, deceptive practices, excessive fees and abuse of their non-profit status.

The report also concluded that creditor practices and funding reductions have caused agencies to cut back on educational services and have led more consumers to drop out of counseling and declare bankruptcy. Another key finding was that poor oversight of credit counseling agencies by the Internal Revenue Service and the states has allowed unscrupulous counseling agencies to grow and prosper.

"The findings of this report show that the credit counseling industry has undergone an alarming transformation in the last decade," said Deanne Loonin, Staff Attorney for the NCLC. "Aggressive firms masquerading as 'non-profit organizations' are gouging consumers. Deceptive practices and outright scams are on the rise," she said. "More consumers are getting bad advice and access to fewer real counseling options. Meanwhile, most state and federal regulators appear to be asleep at the switch."

Major Problems With Credit Counseling
Don't be confused, this type of company NEVER negotiates down the principle balance of your debt. These CCC organizations work for the creditors, NOT YOU. They are just like a collection agency. In addition to what the creditors pay the CCC company, they charge you a monthly service fee for dispersing your money to your creditors. Until recently, these companies were paid a commission of around 12% to 15% by the creditors for recovering the debt for them. That means for every dollar you give to them, the creditor was giving 15 cents back to the CCC company. (Several well-known credit card issuers refuse to work with ANY CCC company.)

If you are already having problems making your minimum monthly payments now, how are you going to afford a higher amount over a period of many years? For this reason it is very rare that anybody will complete the program in the specified time originally stated. Many people fall off the program two or three times, thus extending the original 4 to 5 year plan to 7 to 12 years!

Despite marketing efforts and glowing remarks to the contrary, CCC programs do affect your credit report, so don't be misled. When you are accepted into a CCC program your creditors will close your accounts and report this to the credit bureaus. Although this is less damaging than bankruptcy, it definitely does impact your credit rating. Don't let anyone tell you otherwise, just to sell you their service! Instead, look into other options.

Contact: National Legal Debt Centers, Inc.: www.nldc.us

References:
Todays Senior News:
http://todaysseniorsnetwork.com/credit_counseling_scam.htm

Consumer Federation of America article on the Credit Counseling Industry: http://www.consumerfed.org/040903ccreport.html

Debt Reduction Alternatives:
http://www.nldc.us/debtoptions.html

Credit Repair Information
www.creditchampion.com

FTC Consumer Alert: Advertisements Promising Debt Relief May Be Offering Bankruptcy: http://www.ftc.gov/bcp/conline/pubs/alerts/bankrupt.htm

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