Questions That Help You Qualify Debt Management Companies
Debt management companies work under different business models, and their service menu is by no means standardized. While the better companies offer highly customized services that are geared towards your specific financial situation, others offer little more than cookie-cutter service. As with any purchase of goods or services, it’s important to ask a few relevant questions before making your choice.
Do I Need Debt Management?
This is perhaps the most relevant question of all, and you should get it answered before you even begin searching for a debt management program. Educate yourself on all the debt relief options available to you, including debt management, debt settlement, debt consolidation, and bankruptcy, both from a do-it-yourself and a professional services standpoint. Don’t eliminate any option until you’ve examined its pros and cons.
If you do decide a debt management plan (DMP) is the best option, the debt management company should help you make the final decision by examining your financial situation and offering you a counseling session to discuss the available options, their costs, and their repercussions.
What Will a Debt Management Program Cost Me?
There is no set fee structure, and even non-profit debt management companies can assess a hefty fee. Get a price quote in writing. Ask if they offer discounts; some agencies will waive or reduce fees to consumers who are in dire circumstances. The do-it-yourself legal site Nolo.com reminds people that any fee given to a debt management service is money that could be otherwise used to pay debts, so weigh the advantages and costs carefully. Paying more in debt management fees than you save in reduced interest and principal would be a poor financial choice. Consumercredit.com offers a chart of average fees that compares enrollment fees and maintenance fees for an average client with five credit cards undertaking a debt management program.
What Is Your Scope of Debt Management Services?
Debt management companies offer a wide variety of services, and the menu of services is not consistent from agency to agency. Of course, the primary services you should expect to see are:
- Assistance in negotiating debts
- Setting up a payment schedule
- Managing your monthly payments
In addition, some companies may offer other financial services designed to help you lay the foundation for a more secure financial future, such as:
- Budget counseling
- Personal finance classes
- In-person or telephonic sessions with certified counselors
Are Your Employees Commission-Based?
How the employees of the debt management company are paid is very important. While some agencies pay salaries, others may pay employees on a commission basis to encourage sales of specific products, which could conflict with your financial needs and cost you more money. These types of companies should be avoided, as the advice you receive may be biased towards the financial products they are promoting.
Are Your Credit Counselors Qualified?
Some debt management or credit counseling agencies staff their offices with poorly prepared and poorly educated staff members who do not comprehensively understand the business, and whose main goal is to sell you something. Choose an organization that employs highly trained counselors who are accredited or certified by a third-party organization that is not affiliated with creditors.
Is The Agency Licensed to Operate?
Because credit counseling is not federally regulated, it is up to the individual states to determine licensing requirements. Make sure your agency is licensed by your state and in good standing. In addition, contact the local Better Business Bureau, the state’s Office of the Attorney General, and any local consumer protection agency to check whether they are in good standing. Keep in mind the FTC’s warning that the absence of complaints is no guarantee that an agency is legitimate. If there are complaints lodged against an agency, however, it at least will tip you off that there have been problems in the past, and that the company should be avoided.
Take the time to survey several agencies before settling on one, and examine all your options before signing on the dotted line or handing over any money. For additional information, explore the other articles in our Debt Management Guide. Keep in mind that the debt management company is there to serve your needs—and if they do not seem like they will or are more interested in their own well-being, look elsewhere.