How to Avoid Credit Counseling Scams

by Ron Haynes

Credit counseling scams have to be one of worst scams that can be run on people. Once someone has made the decision to enter credit counseling, they’ve probably been through a lot already. Though there are many reputable credit counseling services, there are also many organizations that operate with questionable ethics and prey on debtors’ vulnerabilities and fears. For instance, they might offer variable-rate loans with APRs that start low but quickly ratchet up to 20%, or they might charge exorbitant up-front fees or even undisclosed fees for their services.

Around 15 years ago, I went through credit counseling through the YWCA and was able to get my finances back on track. After one full year of on-time payments, my wife and I were able to secure a mortgage and buy a home. Thankfully I wasn’t the victim of a credit counseling scam but in my frame of mind at the time, I easily could have been taken. I did however, know enough to make sure I was dealing with a non-profit and to get some references of people who had been helped previously.

Before you sign up with a counseling service, it’s essential to make sure you’re dealing with a reputable business by asking these questions:

  • Are you a nonprofit organization? Many for-profit services identify themselves as nonprofits. To be sure you’re working with a nonprofit, ask to see the service’s approval of nonprofit status, an official document issued by the IRS. However, nonprofit status does not guarantee a counseling service’s reputability. Many nonprofit counseling services have been accused of the abusive practices common among for-profit companies.
  • Is the agency accredited? Confirm that the company is a member of the National Foundation for Credit Counseling ( or the Association of Independent Consumer Credit Counseling Agencies (
  • Are your counselors trained and certified? All credit counselors must go through official training and certification. Don’t work with an agency that doesn’t have certified counselors.
  • Can I get regular reports about the status of my accounts? The agency that you work with should grant you access to your creditors (and the accounts that you have with them) at any time. That way, you can ensure that the credit counseling service is actually paying off your debts as you expect.
  • What fees do you charge for your services? Nonprofit credit counseling services usually charge minimal fees. These fees should not exceed $75 for enrollment and $40 for a monthly payment. Don’t work with a service that charges higher fees.
  • Are you a Better Business Bureau (BBB) member? Work only with companies that are BBB members. To check a company’s BBB standing, visit
  • How are the counselors paid? Avoid companies that pay their credit counselors on commission. It’s likely that the counselors’ own financial interests will take precedence over yours.
  • Do you have previous customer references? Many shady credit counseling operations display a binder full of “testimonials” from past customers. Don’t consider these testimonials to be sufficient endorsements.Instead, request the contact information of previous customers and contact them directly to discuss the agency’s services.
  • Would your creditors be willing to work with the particular agency you are considering? Don’t ask the agency this question: ask your creditors.

How to Check Up on Your Account

Even if the service you choose to work with answers all those questions satisfactorily, you should do the following to make sure you’re not being scammed:

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  • Arrange to receive copies of your statements each month, even if the service is paying your bills for you.
  • Monitor your statements closely to make sure your creditors are receiving payments according to your DMP.

Before you begin working with a credit counseling service, it’s important to realize that you remain accountable for your debts, even if the service is responsible for paying them off. If you work with a shifty service that fails to pay your creditors in full and on time, you could end up with a lower credit score and even more debt.

About the author

Ron Haynes has written 988 articles on The Wisdom Journal.

The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.

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