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Credit Counseling Firms Under Federal Scrutiny

By Maxine Shapiro, KERA 90.1 business commentator

Dallas, TX – Years ago, I really trusted consumer counseling. But with the recent barrage of ads almost capitalizing on the past two years of economic hard times, I began to question a few companies and their legitimacy. Well, so has the IRS and the Federal Trade Commission. I'm Maxine Shapiro with KERA Marketplace Midday.

I'm not surprised, but a little disheartened to hear some consumer counseling services are under investigation by those two government agencies. Tuesday, the Associated Press reported the inquiry is due to a high volume of complaints. Both the IRS and the FTC question whether these nonprofit counselors even meet the standards for educational, tax-exempt status.

Once a consumer makes the decision to call, walk in, or go online to one of these services, they're in a vulnerable position already. Usually, non-profits are a group you can trust. Don't be na ve, because some of the complaints range from hidden charges, high fees, or late fees occurring when the counseling service neglects to pay the consumer's creditors on time, and sometimes the creditors don't get paid at all.

So the Consumer Federation of America and the National Consumer Law Center offered some warnings and suggestions when considering debt consolidation and counseling. Here are a few:

- Don't let an advertisement steer you. Ask for referrals from friends and shop around.

- Once there, 30 to 90 minutes should be the minimum amount of time spent reviewing your particular situation to make the appropriate recommendations. Any less, walk.

- Besides debt consolidation plans, credit services that offer classes in budgeting, savings and debt management should be a priority.

- Talk about fees. Leave if they won't. Fees should not exceed $50 for debt consolidation. And if a monthly fee is over $25, a better deal is out there.

- And once again, non-profit does not mean affordable fees.

Good tips. For KERA Marketplace Midday, I'm Maxine Shapiro.

 

Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m.

Email Maxine Shapiro about this story.