Beware of so-called 'nonprofit' debt services

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For years, Americans have embraced the idea of "having it all now and paying for it later" by using credit cards to subsidize their monthly incomes.

Many consumers are now realizing that the time has finally come to address their mounting debt loads and are struggling to repay thousands of dollars in credit card debt.

As consumers seek help in their journeys to become debt-free, they are finding that there are hundreds of credit counseling agencies in the marketplace. There are the traditional, community-based nonprofits that have been around for decades assisting clients in developing sound budgets for maintaining secured and other priority debts, while negotiating with unsecured creditors for reduced monthly payments, interest concessions and fee waivers. These agencies still offer face-to-face counseling, as well as telephone and Internet services at minimal charges.

Then there are the newcomers that purport to offer identical services, but are available only to consumers via telephone or Internet and spend big bucks on TV and radio advertisements. Many of these companies also claim to be nonprofit; however, some of their business practices have piqued the interest of consumer protection groups and regulatory agencies nationwide. Notable complaints surrounding these groups involve up-front "voluntary" contributions and exorbitant monthly fees charged to consumers who are already financially strapped. Some of these "nonprofit" groups likewise contract services directly with for-profit entities, affording agency executives hefty annual salaries and other enticing incentives.

In response to questionable practices by some businesses operating in Georgia, the General Assembly enacted a bill into law in 2003 to regulate debt adjustment services. Specifically, the act limits the maximum monthly charges for debt repayment services for Georgia residents to 7.5 percent of the amount paid monthly by a debtor for distribution to his or her creditors, thus eliminating up-front fees. It also requires that those providing debt-adjustment services in Georgia obtain an independent annual audit of any and all accounts through which funds are transacted for consumers and their debtors.

The law also requires that providers of debt-adjustment services secure and maintain a requisite amount of insurance coverage to protect against potentially dishonest or fraudulent activities by both depositors and employees. Finally, this beneficial law mandates that organizations facilitating debt repayment maintain a separate trust account for debtor's funds and that those funds be disbursed within 30 days of receipt. Any debt repayment company operating in Georgia that is thought to be in violation of this law should be reported to the complaint line of the Governor's Office of Consumer Affairs at (800) 869-1123.

The state law relating to debt adjustment provides a sound framework of questions that a debtor should ask a potential debt management organization relative to fee structures, ethical and secure business practices and the handling of consumer funds. There are, however, three additional key points to consider when choosing a reputable agency. One consideration is proximity. Being able to speak with an agent who is assisting with debt repayment via telephone is convenient, but it is no match for being within commuting distance for face-to-face interaction with a local representative if the need arises. Many credit counseling or debt adjustment agencies are out of state and can be accessed only by telephone.

Another important quality is to qualify whether an agency is accredited. Reputable debt/credit counseling organizations are accredited through an independent, nonprofit organization that periodically reviews an agency's service provisions and the means by which these services are delivered to ensure that the best interests of consumers are served. Only quality organizations meeting or exceeding a stringent set of service criteria will be awarded accreditation. The most notable accrediting organization is The Council on Accreditation for Children and Family Services, commonly referred to as COA. A final point of analysis for determining legitimacy of an agency to assist with debt repayment is to determine if the organization is in good standing with the Better Business Bureau (BBB). More than likely, if this type of organization is preying on, rather than truly helping consumers, someone will have filed a complaint with the BBB. Any complaints and subsequent findings will be on record to the public.

KELVIN COLLINS IS THE PRESIDENT/CEO OF THE BETTER BUSINESS BUREAU OF CENTRAL GEORGIA & THE CSRA INC. REFER QUESTIONS OR COMPLAINTS ABOUT A COMPANY OR CHARITY TO (800) 763-4222, WWW.BBB.ORG OR INFO@CENTRALGEORGIA.

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chascush
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chascush 03/01/10 - 10:38 am
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The AARP is a good example of

The AARP is a good example of a so called non-profit outfit. Somebody at AARP is making a big profit.

themaninthemirror
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themaninthemirror 03/01/10 - 03:15 pm
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Avoid the debt service

Avoid the debt service agencies entirely and go to a good bankruptcy lawyer and if you want to repay your debts, file chapter 13 bankruptcy. The court oversees your debt payments so there is no question whether the money is being disbursed on a timely basis. Some people think filing bankruptcy hurts one's credit rating, if you are already behind on your payments, what difference does it make.

wpb
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wpb 03/05/10 - 03:23 pm
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One of the reasons our

One of the reasons our country is in the mess it's in is that many Americans refuse to take responsibility for their own actions. It seems everyone wants to take the easy way out. "themaninthemirror" reflects (pun intended) that trend. The bankruptcy laws exist for those who've tried everything possible to pay their "just and legal" debts. Filing for personal bankruptcy should never be used as cavalierly as he suggests. It's not simply a matter of one's credit report; it's a matter of personal integrity and responsibility. Pay your debts if you can. Otherwise we all pay higher costs due to your personal negligence.

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