A credit card counselor is generally a person who advertises debt relief services to individuals in debt. Debt counselors may offer general debt services or they may specialize in one area of debt, such as credit cards, mortgages, vehicle / vessel debt, etc. Before the financial crisis hit the U.S., credit card counselors received a large portion of their income from the creditors themselves under a program referred to as “Fair Share”. Under this program a credit card counselor stood to make a percentage of the recovered amount from the lender, essentially performing the work of freelance collection agents. Once the economy nose dived, many lenders pulled back on the amount of money they were willing to give to counselors, forcing many counselors to charge higher and higher fees to their clients.
Credit card counselors are regular people trying to run a business, so it makes sense that many credit card counselors would look for alternative sources of income when lenders began offering less money under Fair Share, but like many debt relief services, many credit card counselors don’t offer anything above what a person can do for themselves. When a person hires a credit card counselor, they authorize the counselor to negotiate a debt settlement agreement with credit card companies on their behalf. One aspect of the credit counseling industry that draws much criticism is the fact that the true efforts of credit card counselors are never actually disclosed. Many of these so called “negotiators” do little to save their clients as much money as possible. It is far easier for the “negotiator” to call the credit card company, ask what amount they want to settle for, use the client’s money to pay the amount or establish a payment plan, take a portion of the savings, and pass the remainder on to the client. For many clients this seems like a blessing, but the fact of the matter is that a person who pays for a credit card counselor never really knows how hard the counselor will try to save them money.
A good credit card counselor should be relentless, knowledgeable of credit laws, strong willed, persistent and honest. Finding a counselor with all of these traits can be difficult. Finding any person with all of these traits can be difficult. After the financial collapse a number of average Joes with little to no financial experience began calling themselves “credit card counselors” and acting as nothing more than middle-men for borrowers and lenders. Even though the credit card counseling industry is full of people who are less than ethical, there are plenty of very hard working and very honest credit card counselors who enjoy saving people money. Unfortunately, these counselors seem to be in the minority. If one doesn’t feel comfortable negotiating with credit card companies themselves, an experienced and licensed attorney should be hired to handle all matters of debt, negotiations, and dealing with lenders. Attorneys know the law and, more importantly, know how to apply the law in the best interest of their client.
If one does not want to hire an attorney for some reason and would prefer to hire a credit card counselor, be sure to do some homework on the counselor before signing any documents. Look for counselors who are members of professional trade organizations that hold members to high standards. Ask for a list of references and don’t be afraid to call those references. Conduct an Internet search for any former client comments relating to the counselor in question. Make sure that the counselor has received all licenses and certifications required to do business as a credit card counselor in their state. Lastly, check with the Better Business Bureau at www.BBB.org for any complaints or accusations of fraud against a specific counselor or their agency.