Personal Finance: Advice for picking a credit counselor

Veteran personal finance journalist Robert Powell answers your questions for USA WEEKEND:

I am looking at debt resolution websites and debt consolidation companies. How do you evaluate which is best?

- Doris Garrett, Ormond Beach, Fla.

You should work with a non-profit agency that is accredited by an independent third party, such as the Council of Accreditation, says Gail Cunningham of the National Foundation for Credit Counseling (NFCC). Being a nonprofit doesnt guarantee that the agency is legitimate, but its a step in the right direction, she says. Of note, many universities, military bases, credit unions, housing authorities, and branches of the US Cooperative Extension Service operate non-profit credit counseling programs, according to the Federal Trade Commission.

The FTC also warns that that non-profit status doesnt guarantee that services are free, affordable or even legitimate. In fact, some credit counseling organizations charge high fees, which they made hide; others might urge their clients to make voluntary contributions that can cause more debt.

She says the counselors should be certified, a Certified Consumer Credit Counselor is one such designation, and counselors should not be offered any incentives or compensation to write whats called a debt management plan. The Federal Trade Commission recommends working with an organization that offers in-person counseling.

The NFCC recommends asking: Will the agency work with all of your creditors? What debt relief options are offered? (Walk away if its just a debt management plan.) Does the agency provide educational classes or workshops? (Legitimate agencies do.) Is there a minimum amount of debt required to be counseled? (Walk if the agency tells that says yes.) How long will your counseling sessions last? (Dont settle for drive-through counseling.) Is your first payment considered a donation? Also, ask how your deposits will be protected. (The agency should be bonded or insured.)

Lastly, Cunningham says the agency, should be a member of a national body such as the NFCC, which adds another layer of security and integrity.

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