Bank of America Helps Consumers Learn About Credit Counseling

Every day,consumers are bombarded with information on managing debt, often from sources with varying reputations, including us. This can leave financially strapped consumers confused and unsure of how to start gaining control of their own debt and financial state. Bank of America is helping consumers in these positions by providing though leadership and clear solutions to help them better manage their financial lives.

"Debt settlement agencies are flooding the media with misleading information and in turn, causing confusion for financially struggling customers looking for a lifeline," said Colleen Benjamin, Global Card Services Recovery and Risk Operations Executive for Bank of America. Benjamin is leading debt management work across the industry for the National Foundation for Credit Counseling (NFCC) to help combat misconceptions caused by these agencies.

Since March, Benjamin has been chairing a 40-person work group for the NFCC. The committee members consist of major bank issuers, VISA, MasterCard, American Bankers Association, non-profit agencies and consumer protection advocacy groups. The NFCC promotes financially responsible behavior and builds capacity for its members to deliver the highest quality financial education and counseling services.

Benjamin's work group in particular has three main areas of focus:

- Legislative efforts: There are no Federal regulations for debt settlement industry,

- Product and solution work: Investigating how issuers can support non-profit agencies in their work to help consumers with low or no cost products.

- Consumer awareness and communications: Providing education and awareness of options.

"It can be very confusing for a consumer in choosing between debt settlement vs. credit counseling and who to turn to when you're scared, over extended financially and in desperate need of help." We are working to eliminate and broad reaching, deceptive marketing, practices of many in debt settlement industry and to educate customers about their options," said Benjamin.

Debt settlement firms take their fees up front, typically 15% to 20% of consumer's debt. And even in the best case scenario, where debt is reduced or eliminated, their programs can significantly and negatively impact a consumer's credit score. In the worst case scenario, the firm takes the fee and does nothing to help the consumer. Sometimes, a consumer will eventually find a non-profit credit counseling agency, but is often to far behind point to be helped.

"It is important for customers who are struggling financially to understand all available options and the potential consequences of working with a for non-profit settlement company," said Benjamin. "Customers who start working with debt settlement companies are five times more likely to charge-off one year later than customers working with a non-profit credit counseling agency. The win for everyone with credit counseling is evident."

The Federal Trade Commission (FTC) and Attorneys General from several states are conducting ongoing investigations into the deceptive practices of this industry. The HFCC work group has met with legislators to bring to their attention predatory marketing practices and other concerns. The work group provided the FTC with the top 10 debt settlement companies, misleading information from their websites and the number of Better Business Bureau complaints. Also, provided were copies of several debt settlement contracts--including on contract that charged a consumer $8,000 in fees.

Next steps for the work group include using public service announcements to further educate consumers on the differences between debt settlement and non-profit credit counseling. They will also conduct focus groups with consumers to better understand why they chose a for-profit debt settlement company.

Have you contacted a credit counseling agency? Were they able to help? Did they charge excessive fees and not really do anything?

Related Articles:
I Have A Repayment Plan Set Up With The National Foundation for Credit Counseling And I still Can't Afford The Payments. What Do I Do?

Collection Agencies Keep Calling Me About My Credit Card Debt. Should I Pay Them?

First of all don't pay anyone without verifying who they are or what the debt is. Debt collection agencies will call you if you have debts to pay. Debt Collection Agencies will also pursue old debts that you never paid off, in hopes that you will pay it just to get them to stop calling and harassing you. But beware! With the economy the way it is there are plenty of scams these days. Most of the time the debts don't exist. They are the result of identity theft, clerical errors, or credit reports that have not been updated. Other debts are so old the debt collection agency no longer has the right to legally sue to collect. I have seen court orders sent to people just before the legal time period is about to pass in hopes of being able to collect. I have also seen debts sold to other collection agencies in an attempt to extend the legal time period. Starting the clock all over. Within 30 days of being contacted by them, be sure to send the debt collection agency a letter explaining you do not owe this money and request proof that the debt is legit. Make sure the letter is certified and have them send you a copy of the bill to prove that it is true. If within 30 days the debt collection agency does not provide proof of the debt, they can longer keep contacting you. Also, they cannot list the debt on your credit report. You should always review your credit report at least once a year. Visit annualcreditreport.com to get a copy of your free credit report. All of the three credit bureaus, Equifax, Experian, and Transunion, are required to provide you with one free credit report a year.

My Credit Card Payments Are Through The Roof: What Other Option Do I have Other Than Bankruptcy?

The National Foundation of Credit Counseling is the best place to turn for options. If a Debt Repayment Plan isn't on option you are eligible for, a credit counselor at NFCC will work to find you a better alternative to bankruptcy. Only 1 out of 10 of the National Foundation of Credit Counseling clients end in bankruptcy.

We have given these options before if you owe more than you make. If you have tried all of our recommended alternatives to pay your credit card debts such as, working a second or even a third job, sold material possessions, renting out a room; if your credit card debt keeps growing and your interests rates are shooting up over 30% and you have no other way out, then bankruptcy, unfortunately, may be your only hope. But as you should know that a bankruptcy will destroy your FICO credit score. But if you are so far in debt you are probably even behind in your payments as well, and your credit score is probably in the toilet anyway. Bankruptcy should always be your last resort. Not just an easy fix. Nothing comes easy.

If you decide to go ahead with bankruptcy please consider this. You need to find a reputable attorney who will explain current laws, the pros and cons of filing bankruptcy, and the different types of bankruptcy: Chapter 13, Chapter 11, etc. Visit credit.com for explanations of the different types of bankruptcy filings.

I Have A Repayment Plan Set Up With The National Foundation for Credit Counseling And I still Can't Afford The Payments. What Do I Do?

There is hope coming. So, don't quit. There could be more options available soon. The National Foundation for Credit Counseling is working with the top credit card companies to standardize a Debt Repayment Plan. The plan is to offer lowered interest rates that would be low enough to allow consumers to pay off their current balances within five years. The plan is to include fixed payments of 2% or a hardship payment of 1.75%. Visit the National Foundation for Credit Counseling at NFCC.org or call 800-388-2227 for more details.