How Credit Counselors Advocate for Banks
If you’ve accumulated a lot of credit card debt, you’ve probably had occasion to speak to your bank about it. Perhaps you asked them to forgive a late fee, or questioned why they raised your interest rate so impossibly high that you will never be able to pay off your balance. If you’ve had these discussions with a bank representative, it’s possible the bank suggested you look into a credit counseling service. Naturally, they frame this suggestion as a tremendous benefit to you. But what they won’t say is that, out of all your possible debt resolution options, credit counseling is the friendliest to them.
Credit counselors are generally nonprofit 501(c)3 corporations that dispense advice for consumers who are struggling with debt, and sometimes negotiate concessions from banks. They are independent entities, so they’re not exactly colluding with the banks. But their advice can often be better for the bank than for you.
For example, if you are having trouble paying more than the monthly minimum on your credit cards, they may convince you to buy into a debt management plan, or DMP. With a DMP, you pay the credit counseling company a fee to pore over your finances, design a budget and manage the payment of your debts. You don’t have to send individual payments to all your creditors; you pay one monthly amount to the credit counselor, and they manage payments. Your monthly payment to the credit counselor could be less than what you are paying now, if they can negotiate forgiveness of late fees and a lower interest rate. A DMP is designed to last up to 60 months, at which time you could be debt free.
However, for many consumers, the DMP doesn’t save all that much money. They pay 100 percent of what they owe. Their only savings come from reduced interest rates, which were probably outrageously high in the first place. Additionally, many consumers have too much debt to repay during the program. So, even after they make regular payments for five years, they are still in debt.
A credit counselor will rarely recommend bankruptcy, even though it could be the best option for a consumer with large credit card debt. At DebtStoppers, we handle Chapter 7 and Chapter 13 bankruptcy filings for our clients. With Chapter 7, a court could discharge the bulk of your debt within months. With Chapter 13, you could be on a repayment plan for three to five years, but at the end of that time, the court would release your from your remaining dischargeable debt. Now which would you prefer, a program that leaves you in debt, or one that wipes your slate clean?
If you want a plan that’s good for the bank, call a credit counselor. If you want the best debt relief plan for yourself, call DebtStoppers — we can help you take action to get out of debt quickly and completely. Call us at 312-913-0630 or contact our office online to schedule a free consultation.