It's great that other countries have legitimate debt counseling services, especially when it's free. Unfortunately from my personal experience (years ago during my school days), I haven't seen a decent US based debt counseling service; even the "non-profits" were slimy. (Maybe things have changed, but since this venture is around; I have my doubts.)
1) They are ridiculously expensive. They base their fees as a percentage of your total debt. Most of these organizations refused to talk to me simply because I had less than $10,000 in credit card debt. To me this was the first sign that the majority of the industry in the US was a scam.
2) One of the key benefits they offer is interest rate and payment renegotiation. I do not believe it was much different from you calling the credit card company yourself and simply asking for it. I know first hand because I asked what rates these companies could offer me and I was able to get that rate or even below with one phone call (to each of my credit card companies). This simple service wouldn't be so horrible and unfair if the fees weren't so exorbitant.
If after they renegotiate the terms of your credit debt, and somehow the credit card company jacks up your rate again (even if you have done nothing wrong in that period): a) they do not monitor your debt, and b) they will not renegotiate the terms. The only thing they really monitor is your payments to their organization. I vaguely remember reading some fine print that they wouldn't be liable for missed payments (their fee and your credit card payments, are billed as one payment to their organization - they pay the credit card companies for you).
3) There were even nastier sketchy organizations that were essentially asking you to default on your unsecured debt. The service they provided was just to redirect your official phone number and address to their office, so you wouldn't have to deal with people harassing you for repayment. On the surface, they only asked for 10% of your debt and they didn't have a minimum limit. However they wanted you to make payments to their company for the full amount of your credit card debt as a 'savings account' that you would get back (minus their 10% fee); which happens only after you paid your total debt amount in full (to them). Honestly I wonder if they would even give your 'savings' if you did pay in full after your credit was completely ruined.
If this company is sincere, I really hope they succeed. That industry desperately needs an honest company.
Thanks for your reply. I've seen many of the problems you mention in the UK too (except for 3 which is totally evil).
I'm surprised the US doesn't have a charity offering a similar service to what we do in the UK; over here debt advice is a regulated industry and registered advisers work for a wide range of organisations - charities, local authorities etc. A friend of mine even interviewed recently for an gardening club that wanted to hire a debt adviser to help it's members.
With respect to (2) you are totally right. If you phone your bank asking to reduce the size of your payments they will jump at the chance to do it. The reason is simple - reducing payment amounts increases the lifetime of the loan and therefore increases your overall amount of debt.
well it was also an interest rate reduction as well as a payment amount reduction. I was able to take 6-8 points off from my various creditors at the time.
1) They are ridiculously expensive. They base their fees as a percentage of your total debt. Most of these organizations refused to talk to me simply because I had less than $10,000 in credit card debt. To me this was the first sign that the majority of the industry in the US was a scam.
2) One of the key benefits they offer is interest rate and payment renegotiation. I do not believe it was much different from you calling the credit card company yourself and simply asking for it. I know first hand because I asked what rates these companies could offer me and I was able to get that rate or even below with one phone call (to each of my credit card companies). This simple service wouldn't be so horrible and unfair if the fees weren't so exorbitant.
If after they renegotiate the terms of your credit debt, and somehow the credit card company jacks up your rate again (even if you have done nothing wrong in that period): a) they do not monitor your debt, and b) they will not renegotiate the terms. The only thing they really monitor is your payments to their organization. I vaguely remember reading some fine print that they wouldn't be liable for missed payments (their fee and your credit card payments, are billed as one payment to their organization - they pay the credit card companies for you).
3) There were even nastier sketchy organizations that were essentially asking you to default on your unsecured debt. The service they provided was just to redirect your official phone number and address to their office, so you wouldn't have to deal with people harassing you for repayment. On the surface, they only asked for 10% of your debt and they didn't have a minimum limit. However they wanted you to make payments to their company for the full amount of your credit card debt as a 'savings account' that you would get back (minus their 10% fee); which happens only after you paid your total debt amount in full (to them). Honestly I wonder if they would even give your 'savings' if you did pay in full after your credit was completely ruined.
If this company is sincere, I really hope they succeed. That industry desperately needs an honest company.