Credit Counseling

“When I was looking into credit counseling, I wanted to make sure I wouldn’t just be on a treadmill of debt. Ya know, work with a credit counselor and be in the same spot three years from now.”
Julie, Houston

Credit Counseling

  • How they can help: Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counsels are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counsels discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems.
    • Many universities, military bases, credit unions, housing authorizes, and branches of the US Cooperative Extension Services operate nonprofit credit counseling programs.
    • National Foundation for Consumer Counseling ( provides member agencies by location for consumers who are in debt.
    • Many credit counseling organizations are nonprofit but just because an organization says “nonprofit” there’s no guarantee that its services are free, affordable or even legitimate.
    • Recent deceptions by credit counseling agencies about the nature and costs of their services, include but are not limited to:
      • Failure to pay creditors in a timely manner or at all. Some credit counseling agencies that offer debt management plans may fail to pay creditors in a timely fashion or at all.
        • Consequences can cause serious consumer harm, such as late fees that the creditors impose.
        • Failure to abide by telemarketing laws. To the extent that these agencies are not bona fide nonprofit organizations, they must comply with the Federal Trade Commission’s (FTC) Telemarketing Sale Rule, including the National Do-Not-Call Registry.
    • Some recent FTC actions have been taken against the following companies:
      • AmeriDebt – November 2003
      • Debt Solutions, Inc – May 2007
      • Innovation Systems Technology, Inc. – February 2004
      • Debt Resolution Specialists, Inc. – February 2004
      • Jubilee Financial Services, Inc. – September 2002


Protect yourself

  • Pay careful attention to the fees an agency charges, the nature of the services it offers and the terms of the contract.
  • Be wary of high up-front or monthly fees for enrolling in credit counseling or a DMP.
  • Be wary of credit counseling organizations that pressure you to make “voluntary contributions,” another name for fees.
  • Make sure that your creditors are willing to work with the agency you plan to choose.
  • Be wary of credit counseling organizations that demand that you make payments into a DMP before your creditors have actually accepted you into the program.
  • Consider using agencies that offer actual counseling and education, instead of simply enrolling all their clients in DMPs.
  • Avoid credit counseling organizations that won’t send you free information about the services they provide without requiring you to provide personal financial information, such as credit card numbers and balances.
  • Avoid credit counseling organizations that try to enroll you in a DMP without spending time reviewing your financial situation.
  • Check out potential counseling agencies with your state Attorney General, local consumer protection agency, and Better Business Bureau. They can tell you whether any complaints have been filed against the agency you’re interested in using.
  • They can tell you if consumers have filed complaints about the company. But even if there are no complaints about a company, it’s not a guarantee that they’re legitimate.

On to the next section!