Credit Counselors?

February 17, 2005 12:53 PM

Do you have experience, good or bad, with a credit counselor or consolidation firm that you'd like to share?

I've heard that credit card companies don't consider someone in danger until they've accumulated debt in the order of 3 times their annual salary, which is mind-boggling. I'm nowhere near that (nowhere near my salary, thankfully), but I'm irresponsible enough to have accumulated some high APRs on three cards. I've been paying down my cards for a couple of years, but as soon as I get some breathing room on one or two of them they immediately decrease my limit. (I don't use any of them, I only use my AmEx which I pay off religiously.) Calling them to ask for lower rates, etc, has no effect,

It's time for me to get some help. I'm not drowning, but feeling the current a bit. I know this type of action is likely to be a knock on my credit rating, but better a small knock now than a big crash when an emergency comes along and I have no cash to keep paying down debt.

I know the theory (someone, on my behalf, consolidates my debt into one payment), but most of the firms that advertise seem slimy (non-profit doesn't mean they aren't in it for the money). Any first-hand experiences you can pass one? Any companies/individuals you can recommend?

posted by o2b to Work & Money (16 answers total)

The company I was involved with (American Debt Management I believe) wasn't making payments on time, and they took out a huge fee.
posted by drezdn at 1:06 PM on February 17, 2005

My experience is from several years ago (c. 1996-98), but I used Consumer Credit Counseling Services in Chicago (they were the main non-profit game in town at that point, I believe) and they helped a lot in getting some credit card debt and other misc. debt well under control. Their monthly fee was quite small (something like $5?) and as far as I know they paid everything on time and correctly.

A few years later, though, when I needed to get records from CCCS to prove that there was an error on my credit report, they said they didn't keep records "that long" -- meaning more than a year or two after a client had finished going through counseling. (This was a pain, because Best Buy was continuing to list my account with them from the early '90s as never having been paid off, despite the fact that I'd paid it off many years previously. It's finally rolled off my credit report now, but it should have rolled off much earlier.)
posted by scody at 1:14 PM on February 17, 2005

So far my spouse and I have been really pleased with Take Charge America. MBNA actually referred us to them as not all credit card companies work with all credit consolidators.
We pay a fee monthly and they negotiated fairly good interest rates and the best thing is we just get automatically debited monthly and will be out of this debt in 4 years. They have been very responsive whenever I have called and send a monthly statement. You also continue to receive your credit card statements and can watch your balances go down.
posted by mookie at 1:16 PM on February 17, 2005

If your only worry is high-interest credit card debt, why not look into a debt consolidation loan? Pay them all off flat, and then just make loan payments. And chop the cards into confetti.

Now, if you're defaulting on any or all of them, that's another story.

Seems like that wouldn't be as bad as a credit counselor in terms of your credit report.
posted by Kellydamnit at 1:18 PM on February 17, 2005

You should only work with a nonprofit. Anyone who claims you can pay them to fix something is not worth doing business with. I used CCCS in around 1993 and I am so glad I did.
posted by terrapin at 1:44 PM on February 17, 2005

I can't remember the name of the place, but I went to one of these close to a decade ago out of school and they seemed all helpful and nice until I looked at the paperwork and discovered they were hoping I'd sign something with a higher APR than the cards I was trying to consolidate, and with a huge up front fee. I responded with, "you're kidding, right?" and got a pretty good counter-offer which was quite a bit lower than what I'd been paying, and something like a 1% one-time fee. I accepted the offer, even though I was annoyed at them for what they'd tried to pull.

Make sure you read exactly what you're getting into, and realize that everything's negotiable.

Another option, as kellydamnit states, is a signature loan. Local credit unions are often pretty good about giving loans with good rates. Does your employer offer membership in a credit union? If not, in many places, there are credit unions you can join just by living in the right county.
posted by cactus at 2:00 PM on February 17, 2005

I used Genus. They did not consolidate my debt, but rolled all my payments into one monthly automatic deduction. They also negotiated with B of A, to whom I owed the most money, and were able to get the APR down to zero. Pretty sweet. They offer lots of advice and tips n' tricks for money management on their site. I was able to pay all my bills down in about half the time they had originally estimated. Fees at the time were $3 per month per card. They saved me a lot of heartache and I'm debt-free today (outside of my mortgage, that is). Good luck and congratulations for taking the debt bull by the horns!
posted by killy willy at 2:27 PM on February 17, 2005

I had problems with CCCS. When I started with them, they didn't charge, saying that the fees were paid by the creditors. They started charging a monthly fee later. My larger problem, though, was that they sometimes didn't make payments on time, and when payments get made late (even though they were deducted from my checking account on time, CCCS didn't send them off to the creditors on time), your agreements with the credit card companies are no longer in effect, and they start charging you the much higher default rate. It's my own fault that I didn't catch that for many months, but CCCS wouldn't even try to get the credit card companies to remove the extra interest, let alone take responsibility for their errors. I should add that this all happened five years ago or so, and that each office seems to be locally run.
posted by anapestic at 2:47 PM on February 17, 2005

is it normal for credit card companies to decrease your credit limit?

it seems crazy, because your debt amount/credit limit helps determine your credit score, and thus they are preventing you from ever improving it!
posted by reverendX at 3:02 PM on February 17, 2005

Here's a summary of the Federal Trade Commission's testimony in March 2004 (before a Senate subcommittee), regarding deception in this industry, with a link to the full text, and another link to the FTC's formal advice on chosing a credit counselor.

And since the FTC can't impugn the integrity of for-profit businesses in general (that could be taken as un-American), I'll do it for them - while there are certainly incompetent or fraudulent non-profit credit counseling organizations, the odds are much worse if the organization is a for-profit. (You can check Guidestar if you want to verify non-profit status, as well as how much upper management is being paid.)
posted by WestCoaster at 3:41 PM on February 17, 2005

Response by poster: reverendX: it's happened twice now, and both recently. I know one of them happened after a merger. Oddly, one of my other cards recently *upped* my limit, so I know I'm not a total loser.
posted by o2b at 3:50 PM on February 17, 2005

Response by poster: here's another question: If you sign up with one of these guys, does that preclude paying off your debts in full if you manage to find the money? (As it happens I'm owed quite a bit of money, enough to eliminate 75% of my debt, but have no hope that it will show up soon.)
posted by o2b at 4:01 PM on February 17, 2005

Response by poster: crap, another question: I get, as we all do, offers for cards in the mail. I'm steadfast in my resolve and do not fear accumulating more debt if I were to get them, but is it a good idea?

I figure if I get them I can transfer some balance over to some (slightly) lower rates, and at the very least I can decrease my debt/credit ratio.

Bad idea?
posted by o2b at 4:11 PM on February 17, 2005

o2b, I was able to pay my debts off earlier with Genus with no penalty. Genus made the monthly minimum payments using the automatic deductions. But since I still received monthly statements, I was able to make additional payments and run them down much faster (I got a higher paying position at work and used the extra $$$ for personal debt relief). As each card was paid off, all I had to do was call and they removed it from their payment schedule. No fuss, no muss. I can't recommend them highly enough. Re: balance transfers. READ THE FINE PRINT. Sometimes the lower rate only applies for a limited time, so may not save you in the long run.
posted by killy willy at 4:23 PM on February 17, 2005

Just be aware that credit counseling services are paid by your creditors -- they get a small fee for each payment you make to each creditor -- so it is in their best interest to keep you paying it off as long as possible. For example, if they happened to be a couple days late on a payment and caused that creditor to jack up your rates and add on some fees, that'd be real good for them. That's not to say that they all act unethically, just that there's a buried conflict of interest that you should be aware of.

I used a law firm in New York to do the bulk of my $50K paydown. They did not take the kickbacks from the creditors and the theory was that they would be able to negotiate better deals for you as a result. I wouldn't particularly recommend them so I will not mention their name here, but when they screwed up I at least knew it was due to incompetence rather than greed.
posted by kindall at 4:46 PM on February 17, 2005

When I had multiple credit card debts and needed to consolidate, I researched a bunch of credit card deals until I found one with a low rate that I could get on transfers and which was more or less permanent (so long as I didn't use it for anything else. If I'd used it as a regular credit card, that would have had a much higher rate and would have been paid off only after the lower rate transfers). I tranferred everything to that card and then got serious about making a dent in the principal every month.

It worked pretty well for me.
posted by ursus_comiter at 8:51 AM on February 22, 2005