Consumer Credit Counseling Lawyers

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 What Is Consumer Credit Counseling?

The National Foundation for Credit Counseling (“NFCC”) is a nonprofit credit counseling agency that was established in 1951 in order to promote knowledge of credit and financial affairs. Shortly after it was founded, the NFCC started offering a new service known as, “consumer credit counseling.”

These programs are now provided by a number of reputable credit agencies and are used to educate the general public on things like how to pay down debts and how to better manage personal finances. The agencies also provide various financial services, such as helping consumers to form better budgets and creating debt management plans.

In 1993, an alternative organization called the “Financial Counseling Association of America (“FCAA”)” was created to perform the same types of services that were being offered by the NFCC. Although many consumer credit counseling programs can be found under agencies that operate under both the FCAA and the NFCC, agencies that run such programs are not legally required to do so. Instead, they may operate as standalone organizations.

The main goal of consumer credit counseling is to reduce the overall credit card debt that people owe to financial institutions in the United States and to eventually lower interest rates.

If you think you want to attend consumer credit counseling, but would like to learn more about it first, then it may be in your best interest to contact a local credit lawyer for further legal advice. Your lawyer will be able to explain the program and can discuss some of the pros and cons of attending one. Your lawyer can also recommend other options that can assist you in paying down your debts.

Advantages and Disadvantages of Consumer Credit Counseling

As with most things, there are some advantages and disadvantages that consumers should be aware of before agreeing to undergo consumer credit counseling. This is, of course, if they have a choice. In some cases, a consumer may be ordered to attend such sessions regardless of whether they want to go or not.

Some advantages of attending consumer credit counseling may include the following:

  • It allows a consumer to negotiate with their creditors face-to-face concerning issues, such as lowering their monthly payments and/or interest rates.
  • A credit counselor typically provides useful information that can help educate consumers about how to manage their finances and avoid going into debt in the future.
  • Depending on a consumer’s financial situation, it could help them to get out of debt faster than they would on their own (due to the educational aspect) and may help to increase their credit score.

On the other hand, some disadvantages of attending consumer credit counseling may include the following:

  • If a creditor and a consumer agree to certain obligations and the consumer fails to meet those obligations, then they may find themselves in an even worse position than before they started when they agreed to attend consumer credit counseling sessions.
  • A creditor is permitted to refuse to adhere to a plan. In which case, using a counselor to negotiate with a creditor will not be possible, which in turn, will not produce a successful debt management plan.
  • A consumer may lose access or be prohibited from accessing current credit card accounts and opening new lines of credit.
  • It may not be necessary to hire a credit counselor to resolve certain credit problems. For instance, in minor cases, it may be more beneficial for a consumer to negotiate with their credit card company directly for either lower monthly payments or interest rates. While a credit counselor may be more convincing, they do not typically perform any services that are so outstanding that a consumer could not perform them alone.

How Much Does Consumer Credit Counseling Cost?

Most, if not all, consumer credit counseling services claim to operate as a non-profit organization. Although consumer credit counseling services may not directly charge consumers service fees for counseling sessions, they may classify a fee under a different name, such as:

  • Monthly maintenance charges;
  • Voluntary contributions;
  • Set-up or management charges;
  • Operating fees; and/or
  • Monthly donations.

In addition, while some of the fees mentioned in the above list may be legitimate charges, it is important that consumers know exactly how much of their monthly fees are paid to the credit counseling company and how much will be distributed to various creditors to pay down their debts.

If the answer to this question is vague or seems disproportionate, then a consumer should consider searching for a better company for their credit counseling sessions.

What Should I Expect When Meeting a Credit Counselor?

In order to ensure the best possible outcome, a consumer should bring any documents associated with their earnings, other sources of income, and debt. Documents, such as financial statements, credit card balances, and paystubs, may all be useful during this session.

The appointed credit counselor will then review all of a consumer’s financial documents and use their findings to determine which type of plan may be best suited to the consumer’s current financial circumstances.

It is important to note, however, that a consumer should be aware of whether or not the credit counselor would be willing to draft a simple budget plan, as opposed to a debt management plan. In some instances, creating a better budget to stick to may be all that the consumer needs. Therefore, a consumer should ask prior to signing any documents or agreeing to comply with a debt management plan.

Is Credit Counseling Confidential?

As with any other financial institution, such as a bank or lending organization, a credit counselor is also required to maintain records of consumers who agree to undergo credit counseling. However, credit counselors are not legally permitted to discuss the financial situation of anyone else except for the consumer and can face consequences if they do not secure a consumer’s financial records.

In other words, credit counselors have a duty to protect and to keep consumer financial records they obtain entirely confidential.

Do I Need an Attorney to Assist Me?

Although you do not necessarily need to hire an attorney to represent you when attending a consumer credit counseling session, you may want to consider speaking to a local credit lawyer before you agree to go to counseling. An experienced credit lawyer will be able to advise you on different methods you may be able to use to pay down or get out of debt.

Your lawyer will also be able to further explain the potential benefits and risks associated with attending a consumer credit counseling program. In addition, if you encounter any issues or get into a dispute with a particular credit counseling service agency, your lawyer can assist you in resolving the issue and can even help you to file a lawsuit against them in court if necessary.

You can also hire a lawyer to negotiate with a credit card company on your behalf, rather than attending a consumer credit counseling program. Your lawyer can offer many of the same services as a credit counselor can, albeit at a potentially higher rate.

Finally, if your financial situation requires a solution that is more serious and of a legal nature like bankruptcy, your lawyer will be able to guide you through the process, draft any necessary legal documents, and provide legal representation in the proper court.

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