A Debt Trap for the Unwary: Credit counselors pose as nonprofit saviors, but some only get consumers deeper into the hole

As the economy falters, Americans, choking on a record $1.6 trillion of consumer debt, are flocking to credit-counseling agencies that promise to cut deals with creditors and wrap everything into a single, affordable monthly payment for clients. Sounds great. But it could turn into a nightmare. The...

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Bibliographic Details
Published in:Bloomberg businessweek (Online) 2001-10 (3755), p.82
Main Author: Christopher H. Schmitt in Washington, with Heather Timmons and John Cady in New York
Format: Magazinearticle
Language:English
Subjects:
Consumer credit
Counseling
Debt
Financial counseling
Personal finance
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Summary:As the economy falters, Americans, choking on a record $1.6 trillion of consumer debt, are flocking to credit-counseling agencies that promise to cut deals with creditors and wrap everything into a single, affordable monthly payment for clients. Sounds great. But it could turn into a nightmare. The billion-dollar credit-counseling industry is deeply troubled. Their main source of income has been the fees they collect from such creditors as banks and credit-card companies on whatever their clients repay. But creditors, dismayed at counseling agency practices and under profit pressure themselves, have been whittling away at the fees they pay. Once as much as 15%, they are now 8% or less.
ISSN:0007-7135
2162-657X