We all know the ads that promise to save you 60%-80% on your debts or to get you debt-free in a few years. When we hear things like that, it takes us back to our childhood when our mothers used to say, “Honey, anything that sounds too good to be true probably is!”
Now that we’re adults, it’s time to deal with reality, and here are the facts:
- Consumer debt has dropped for each of the last 10 months, down 9.3% over the past year to a low of $874 billion. However, it is difficult to say whether the decline is due to responsible consumers paying down their debts or the economy forcing banks to write off debts combined with bankruptcies and loan-workouts.
- Overall credit card debt grew by 315% from 1989 to 2006.
- The average household in the U.S. owes more than $8,000 on credit cards. Paying the minimum at 18% interest would take over 30 years to completely repay the debt.
- The National Foundation for Credit Counseling’s “Financial Literacy Survey” found that, “Nearly half of Gen Y adults (born between late 1970s to late 1990s), more than any other group, report having no savings.”
Obviously, there is a severe problem in this country, and one that most of us don’t have the resources or the financial knowledge to solve on our own.
What’s the answer? Call one of the toll-free numbers we see on the small signs we read while waiting at a traffic light? Visit one of the websites that have huge neon signs on the homepage filled with promises of an easy solution?
An obvious first step is to check on the business with the Better Business Bureau (BBB). Are there complaints, how many, were they resolved, and most importantly, what is the “letter-grade” given to the organization by BBB? The letter-grade is the most important assessment because it gives you an overall picture of the track record of the business instead of a snapshot from one or two incidents. Things will happen and there will be the occasional conflict between a consumer and a business. A consumer will complain, write a letter to the BBB, or make an issue of the situation. It happens. The important thing to find out is whether the organization made an effort to resolve the issue and how was it handled.
After you’ve checked with BBB, see if the debt relief organization you’re considering is nonprofit. What’s their mission, are they focused entirely on solving consumer debt problems? Nonprofit organizations typically have educational resources, workshops, online tools and certified financial professionals that can help you learn how to get out of debt and then stay that way.
Next, take a look at whether credit repair is being offered along with helping solve your debt problems. If so, steer clear. These are two completely different animals and when they are combined, it’s often an explosive mixture. In one word, these types of businesses are generally scams.
Does the organization try to pressure you to sign up today and only today? Don’t fall for it. Your debts will be there tomorrow and so will his or her offer to help you if it is a legitimate business. Take time to consider what you’re signing, what type of help you will be receiving, and what it will cost you. Ask for the information in writing if you’d like, so you can review it before committing yourself.
That brings us to one of the most important points of all. What are the fees you will be required to pay? Are they requiring fees “up-front?” Does the representative start talking about money early in the conversation, or if you’re on the organization’s website, does the topic arise before you have finished registering? Another very important question to ask is “where does the first month’s payment go?” Will it be applied in its entirety toward your debts, or is any or all of it retained by the organization helping you? You need to know, so ask the questions!
Speaking of fees, are they excessive? Who controls how much the organization will charge you? In the case of nonprofit credit counseling organizations, the credit counseling session is completely free. If you enroll in a Debt Management Program, there may be a fee subject to the laws of the state under which the provider has its license. If you believe the fees charged by any organization you are considering are too high, get more information and find out exactly what you will be assessed now and throughout the duration of your commitment.
Another important thing to find out is whether the help you’re getting always leads to the same solution. Is it the proverbial “one solution fits all” process we’ve talked about, or does the organization work with you to find the solution that fits your specific needs? Nonprofit credit counselors have in-house and external resources that can help you with solutions like a Debt Management Program, money management guidance, self-help for those who have the ability to do it themselves, home equity loans, judgment proof and bankruptcy.
How about the education and capabilities of those helping you, whether it’s on the telephone or in-person? Are they trained and do they have any certifications demonstrating their personal finance abilities? Nonprofit credit counseling organizations have Certified Credit Counselors with education and certification from a reputable provider, such as the Association for Financial Counseling and Planning Education or the Center for Financial Certifications
Finally, check to see if the organization you are considering is a member of any industry associations that can verify their credibility. For credit counseling organizations, check with the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling
Don’t fall into the “get out of debt quickly” traps that seem to be everywhere today. Do your homework and follow these simple steps, and you’ll find the real help you need.
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Mark Hoewing is an experienced nonprofit executive with superb skills in writing, public speaking, public relations, marketing, and organizational management. A creative thinker, Mark was once known as a leading voice for corporate real estate executives in the United States as Executive Director and CEO of the 23 staff member, 3,500-member International Association of Corporate Real Estate Executives. Later, he owned his own staffing franchise in Boca Raton, Florida which he successfully operated for five years. An entrepreneur and “doer,” Mark then spent five years as a contracted writer, handling projects like OpEd pieces, letters to the editor and editorial content for national and international clients. During that time, he also wrote and produced all of the publications for the Florida Association of Community Colleges. He is currently the public relations manager for InCharge Debt Solutions (IDS), writing all content for the Web site, handling all creative projects, and managing the organization’s public relations effort. In a short period of time, he has successfully developed contacts and is responsible for InCharge’s appearances in The Washington Post, New York Times, NPR, Fox News and many other media outlets. Mark is a Certified Personal Finance Counselor (CPFC) and an expert on credit counseling and the responsible use of credit.
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