Needing SPECIALIZED Debt Management (counseling)? Like many today I used to be under the impression that “traditional firms” such as Consumer Credit Advising Service (CCCS), National First step toward Consumer Credit (NFCC) member organizations, and other ” nonprofit very well firms were the standard to the industry and that EVERYONE which has a debt problem was ideal served by these categories. Boy!!!! Was I inappropriate?
I discovered many myths relying on methods that are now primarily null and void. Yet many from the credit management industry no longer want the consumer to know since it is not in the best interest of the key credit counseling players.
In this element and the follow-up article referenced at the end, you will learn the truth… not necessarily the hype and individual-serving advertising you are used for. I will state emphatically that I am not related to any referenced individual or company for any form of compensation. What you read is simply the facts as having been presented in my experience.
The person who opened my eye was Jim Young, associated with Accelerated Debt Consolidation, Inc. This individual offered me incredible ideas rarely discussed by “traditional” firms. I appropriately tagged Jim’s company (and every other similar agency) “Specialized Financial debt Management.” This article will discover the key reason for the difference in labels and why the two are so distinctively different in their Debt Management Applications (DMP).
Nonprofits (NP) Will not Improve Interest Rates.
The first problem Jim brought to the attention was that decreased interest rates consumers receive off their creditors are the same if the client uses a For-Profit (FP) or a nonprofit (NP) company. For example, if a client is in debt for Chase Bank $10 000, Chase requires 2% from the balance or $200 each month as a minimum payment in the DMP, and they offer 6% for your debt management interest rate. This is what a customer of a debt management firm might get, whether the proposal posted to Chase came from the FP or an NP company. It was also brought to the attention that this “universal umbrella” of NP as it pertains to credit counseling and debt management had not been all cracked as much as before.
After some investigation, I found out that a few firms with the worst data in the business were, in fact, nonprofit (NP) and making huge amounts of money. These categories were about as “Non-Profit” as Donald Overcome. Mr. Young explained that for many years, credit counseling and debt management firms received the system known as a “Fair Share” syndication from the creditors. This did not
affect what the clients paid out or how much was traced to their accounts, but it was a student, quite significant from the debt management firms’ earnings. For instance, in the past, debt management firms could deduct 12% of a company’s payment from American Communicate for Fair Share. So if the client’s payment to CURB through the program was $465.21, the firm could take $12 and send CURB $88. However, the client’s bank account at AMEX had been credited the whole $100. Therefore the debt management firm obtained some serious earnings.
Lenders paid only “Fair Share” to NP groups which could then be a tax write-off for “contribution” to an NP organization. There is absolutely nothing incorrect with this concept, and it failed to affect what the client’s trading accounts were credited. But “Fair Share Distribution” from the main creditors has since been dramatically reduced, and it is not as much of an issue mainly because it once was.
Capitalizing On The Myth
From the early to mid-90s, debt management firms began popping up all over the country. Many started using their NP status as a marketing tool, allowing prospective consumers to believe they were some sort of public service. This directed the consumer to believe clients would likely get their services for less, given that they were NP or running as a “Benevolent Charity.”
As was stated above, the fact remains that interest reductions along with minimum payments are similar regardless of the counseling agency. The only difference would be in the service fees charged (and services provided). There were large variations regarding fees. Not all, but many organizations (FP and NP) retained the client’s initial payment as a setup cost. Though consumer advocates look down upon this practice, a few firms still perform nicely. It is a practice that could be carried out when all creditors re-aged past due accounts to a present status after the proposals had been accepted. Some creditors, such as Citibank and Discover, no longer re-age delinquent accounts, so keeping the client’s first transaction has become a problem.
NFCC as well as CCCS
As the years continued, I looked into NFCC as a regular membership. It seems that NFCC member companies are all CCCS offices. Several of them have different names, like The Eco-friendly Path, Money Management Worldwide, now the mother or father company over CCCS, and Clear Point Credit Options. So although I am not sure that they are the only people, the NFCC may have only one member simply because every NFCC member agency I have researched seems to be associated with CCCS or is often a CCCS. If this is true, this indicates a bit convenient to have financial advisors all over the country saying, “Make Sure They Are An NFCC Member.”
In my experience as a Credit/Debt Management guide, I believe that NFCC member corporations (CCCS) do very well for consumers, including debt problems. They give fine educational materials price tags and have many years of experience helping consumers get out of debt.
Reader Feedback On Regular Policy
Over the years, many individuals have written and revealed how these “Traditional” expert services are in actual practice. Allow share what they have laughed and said from their emotions.
After an initial CCCS as well as a “Traditional” consultation, if it is motivated that a consumer needs a new debt management plan or “DMP” and is qualified for it, one more appointment is scheduled. A good setup fee of around $40 is charged in the event the client intends to enroll. The $40 fee, $12, can be used to obtain a copy of the clientele credit report.
Based on reports from consumers that wrote to me, it would appear that the rationale for the credit report is always to reveal ALL ACCOUNTS the consumer has because these businesses require clients to close and INCLUDE all revolving addresses in the DMP. In the past several CCCS offices did not register clients that were current particular accounts and would not acquire clients unless they were at the least 30 days delinquent. I have gotten reports that some CCCS offices still do not acquire clients in DMP who are current on their accounts, revealing to them that no problems exist.
The reason for the hesitation is that loan companies’ disbursements are only made twice daily instead of daily. This is the problem in billing cycles if your client is currently because he or she may have 8 health care data in the program with various owing dates. If a client seemed to be current on all health care data when he or she signed up for the program and steps weren’t taken to adjust due date ranges before enrollment, this would bring about some accounts to be past due if payments were not handed over by the clients owing dates. This also relieves your debt management firm of almost any liability as it relates to often the client’s credit because the clientele was already behind when they registered.
Many CCCS offices also engage in a “Credit Playing card Cutting” ceremony of varieties where the client is required to launch all credit cards and lower them up. I see this as an undignified process to the subject matter, too. It has also been noted that their client arrangement includes a section requiring DMP clients to DESTROY JUST ABOUT ALL CREDIT CARDS and close just about all open lines of credit. They also need to agree that they will not sign up for any new lines of
credit although enrolled in the program. I agree that after someone has debt trouble, they may also have spending trouble, so agreeing to refrain from incurring any additional debt might be a good policy for many who reach the point of severe delinquency and credit deterioration. Nonetheless, this may not be the only option to get a consumer that may have received some debt due to scenarios out of his or her control that needs help while still demanding some lines of credit for performance, business, and emergencies.
The favorable, The Bad, The Ugly
Inside fairness, I will state that within my years of advising consumers in debt problems, I have read many positive reports regarding these traditional Credit Counseling firms and have never heard any studies of anyone being tricked or taken in any fraudulent manner, as is the truth with many other firms.
Nonetheless, I have received many studies from consumers stating they could not utilize such a plan due to the lack of flexibility for their situation. I have also received studies about billing cycle difficulties related to creditor disbursements because of not taking steps to coordinate due dates and the resulting problems from not disbursing payments to loan companies daily. Also, I am aware of complaints about face-to-face in-office features without the option of handling them out of the phone. The most common complaints about these traditional debt consolidation management programs are the lack of mobility and the feeling of being “put on probation” while in the course.
Summary of Traditional Expert services
Here then is a summation (good and bad) connected with traditional debt management services:
They feature valuable educational materials
They will reduce interest rates on health care data and get delinquent accounts re-aged
If you stay with the program, you will find yourself debt free in a much faster period than on your unique
You will be required to close all existing lines of credit
You must acknowledge not to open or work with any lines of credit
Very little in the event, any steps will arrive at minimizing credit damage
After you complete the program, your credit rating will be better
Upon completion, you should be competent to obtain new credit
Possibly you have to be delinquent on is the reason acceptance
You will have the convenience connected with just one monthly payment
You may be instructed to attend to 1 or 2 in-office features
When reviewing the results with the traditional program above, it can be clear that this would be incredibly beneficial for someone full of debt, possibly behind on the payments, who have demonstrated a lack of control through spending, and who has declining credit worthiness. A consumer in this way would benefit from a program that prevents him from plummeting further into debt and offers some “supervision” blocking further misuse of consumer credit while helping this purchaser to get out of debt much faster.