Credit Counseling Catch 22

[jeffrey]

Modern day credit counseling, often seen as a last resort for consumers trying to avoid bankruptcy, has reached a point where creditor control and legislative reform threaten the very industry itself. What should be considered a financial safety net for consumers struggling to pay off debts, credit couseling is an industry struggling to survive and provide a valuable service.

“In an era when consumer debt is at record levels, the very system designed to assist those in need is a broken system at best,” said Steve Rhode, president of Myvesta. “Currently consumers are not serviced by an industry who has the needs of the consumer in mind. It is an industry that has been besieged by creditors and government guidelines which force the agencies to worry more about day-to-day survival than focus on helping the consumers with in-depth and meaningful assistance.”

According to Rhode, creditors main focus is not helping the individuals in credit trouble, but on demanding successful collection activity. This, in addition to the suggested Inetrnal Revenue Service guidelines have trapped credit counseling agencies in a no-win position.

“Credit card companies, the single largest provider of funding for credit counseling agencies, have drastically cut their financial support while forcing agencies to act as collectors rather than counselors,” Rhode said. “Agencies have to do what the creditors want to stay in existence or they will get cut off from funding. Credit counseling agencies are afraid to speak out for fear of more funding cuts as retribution for speaking the truth.”





“On top of that, government agencies, in an effort to stifle deceptive practices in the credit counseling industry, are suggesting guidelines that threaten the ability of agencies to fund their programs at all.” Rhode said. “We are now faced with an industry that is on the brink of destruction and has to either obey the creditors as collectors or operate without any source of income. Either choice is deadly dangerous and bad for consumers.”

If you are considering credit counseling, it's important to understand all the forces that have a say in the current system. Although credit counseling is supposed to help those in debt trouble, outside interestsdo come into play with credit counseling under its current form and these outside interests may not necessarily be in your best financial interest.

[amomof4]

My daughter tried to go with credit couns. They charged her a $35 sign up fee just to tell her that the interest rate could be reduced by a couple of points and that she needed to send them her monthly credit card payments, and if she were late one time, it would negate it all. She found it easier to just stop paying her credit cards. The credit coun. were really no help at all.