If you believe that a DMP may be your best option for handling your debt problems, take steps to protect yourself from becoming the victim of a scam -- or from choosing a company that charges high fees without providing you with any real benefit.
Use a reputable and accredited nonprofit credit counseling agency. The single most important way to protect against fraud is to use a reputable and accredited nonprofit company to handle your debt management plan. Unfortunately, determining if an agency is legitimate isnt always easy. At a minimum:
Don't enroll in a DMP without receiving other financial advice. A legitimate credit counseling agency will provide you with advice on budgeting and will help you understand the different debt relief options available to you. Don't enroll in a DMP until you have fully assessed your financial situation, explored all your options, and developed a plan for staying out of debt trouble in the future. The agency you use should also be willing to provide you with ongoing budget advice.
Get everything in writing, including fees. Find out what fees the agency will charge for its services. Be aware that agencies may use different names for fees, such as "voluntary contributions." If you don't understand a term, ask what it means. Then, get everything in writing.
Make sure you can make the monthly payment. Find out how much you will be required to pay each month. Don't sign up unless you can realistically make those payments.
Monitor payments to creditors. Continue to make regular payments to your creditors until you have confirmed that they have approved the debt management plan. Find out if the agency you're considering will provide you with regular, detailed reports about your accounts -- if not, don't use that agency. Contact your creditors periodically and review monthly statements to make sure the agency is making the payments on time.
Monitor concessions. If your DMP states that creditors will reduce fees and interest rates, make sure you actually get these concessions. Check your statements or contact the creditors directly.
Some credit counseling agencies close up shop (sometimes because they have taken consumers' money and run) or get shut down by the state attorney general's office or other law enforcement agency. Or you may discover that the agency has stopped making payments to your creditors under the terms of the DMP. In any of these situations, you should immediately:
If you have discovered a DMP scam on your own, file a report about the company with local consumer protection agencies, the Better Business Bureau, and your state attorney general office.
One way to educate yourself about your options for dealing with debt is to read Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Robin Leonard and Margaret Reiter (Nolo). This comprehensive guide shows you how to prioritize your debts, make a budget, negotiate with your creditors, and more.
1 | 2