How to Know if a Credit Counseling Agency is Legitimate
We recently linked to the FTC’s advice for consumers who are “Knee Deep in Debt,” which includes a recommendation that consumers seek credit counseling if necessary.
In giving this advice, the FTC cautions readers that “just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate.” Indeed, it’s important to ensure that any credit counseling agency you use is reputable before taking advantage of their services.
But how can you know your credit counselor is legitimate? Here are some tips:
Credit Counseling Tips
1. COA Accreditation
A great signal that a counseling agency is on the level is COA (Council on Accreditation) approval. The COA conducts regular audits and ensures that the service an agency offers is truly a nonprofit benefit to the community.
Ask your counselor if they are COA accredited or look for the COA logo:
2. HUD Approval
Not every credit counselor will offer housing counseling, but if they do, make sure they’re HUD approved. HUD conducts rigorous audits and their approval is a good indication that a counseling agency is trustworthy:
Look for HUD’s logo of approval:
3. NFCC or AICCCA Membership
Membership in a national trade organization isn’t a guarantee that an agency will be reputable, but it’s something you should look for as a bare minimum. If an agency doesn’t belong to at least one of the two main credit counseling groups, you should be very skeptical.
4. Better Business Bureau Approval
Credit counseling agencies should be members in good standing with the Better Business Bureau. No agency with thousands of clients will be completely free of complaints, but BBB membership ensures that agencies make every effort to respond to consumer complaints until the client is satisfied.
5. Suspicious Services
Most nonprofit credit counselors don’t offer services like debt settlements or credit repair. If an agency advertises credit repair services, consider another alternative.
6. US DOJ Approval
The US Trustee Program keeps a list of credit counseling agencies approved to provide pre-bankruptcy counseling. This approval doesn’t imply any endorsement of counseling services, but it’s another good sign that an agency has taken steps to verify that they are a legitimate nonprofit organization.