Consumer debt management services which offer the option to negotiate terms and repayment structures for consumers are usually the following step after a consumer has taken advantage of credit counseling as a way to intervene in their financial life and avoid further distress that may be rising. However, when it comes to debt management service options, they can be beneficial in helping consumers affordably erase personal loan or credit card debts, but there are certain rules that these companies must adhere to, which can help consumers better select either a credit counseling agency or debt management service to work with.
According to the FTC companies that offer debt relief services have, in the past, been the source of fraudulent organizations who have charged excessive fees or misrepresented their business in a way that could make a consumer’s financial life more troubling particularly when financial problems are already in place. Yet, the FTC states that for telemarketing companies who may contact consumers in a difficult financial position, it’s illegal to charge upfront fees and these companies must disclose aspects of their services that can lead to more transparency in their operations.
One area where consumers have often been taken advantage of by these companies offering to enter a consumer into a debt management plan but actually negotiating a settlement, which will do harm to a consumer’s credit score and can be quite costly. Again, consumers are usually not in a position where they need a debt management plan until after they have spoken with a reputable credit counseling agency, as nonprofit credit counselors do not initially negotiate debt between creditors and borrowers, but will simply review a consumer’s finances first to see whether there debt repayment practices could be improved and debt relief found without further intervention.
Particularly for consumers who may have a personal loan, credit card debts, or a combination of various debt obligations, finding a reputable credit counseling organization can be beneficial in that these companies can guide consumers into more financially responsible debt repayment practices, which again, could help these individuals find debt relief and avoid options like a debt management plan.
However, no matter whether a consumer can benefit from traditional credit counseling or if they need a debt management program, researching a counseling agency beforehand will be vital due to the fact that there are, again, some agencies that still may not be upfront about what services their company particularly entails. While resources like the Better Business Bureau, consumer advocacy groups, or even simple research online can lead to information about credit counseling agencies and debt management programs, when a consumer talks with one of these organizations in person, a reputable company should not only have reputable accreditation, but are open and upfront about how their counseling and debt management programs work, the costs that will be associated with their help, and if a debt management plan is necessary consumers should be able to get a breakdown of where their money is going when they pay into their debt management program each month.
While simple budgeting practices, speaking directly with lenders, or consulting a nonprofit credit counselor may help consumers avoid the need for debt management or further action, it is important to take advantage of these rules that are in place for debt relief services so that consumers can not only better understand what a particular organization offers in term of debt relief aid but how it will particularly affect their personal financial life.