Non-Profit Debt Relief - The Shortcomings of Credit Counseling

Many debt relief companies tout their non-profit, tax exempt status as one of the primary reasons why one should use their services. In some cases, dealing with a non-profit can be advantageous to a consumer. For one, many non-profit debt relief agencies will deal with smaller debt loads. So consumers that are finding that they are not eligible for debt settlement or for-profit credit counseling programs because they do not owe enough can always find relief by enrolling in a non-profit debt service. Secondly, many non-profits will waive their fees if they find that you are truly unable to afford them. Needless to say, these are nice perks offered by some non-profits.

The problem with non-profit credit counseling companies lies not in the fact that they are non-profit. Rather, the problem lies in the service they offer---a service that studies show has up to a 70 percent failure rate.

1. Non-profit status does not ensure affordability – Having your fees waived by virtue of the non-profit status of the credit counseling organization is nice, but that does not necessarily mean that you will be able to afford the monthly payment. Many consumers find that credit counseling does not provide adequate debt relief. Moreover, as little as one missed payment can lead to being dropped from the special interest rates offered by the credit card companies – When this fact is considered in light of the high monthly payment, it only makes working with a non-profit credit counselor more problematic.

2. Non-profit status does not ensure legitimacy – Despite popular conception advanced partly by the non-profit agencies’ advertising initiatives, working with a tax exempt organization does not necessarily ensure that the company is reputable. In fact, recent IRS audits have lead to over 30 credit counseling agencies from losing their non-profit status. Other supposedly non-profit debt relief companies like Ameridebt have been completely shut down by the FTC for deceptive practices.

3. Non-profit status does not ensure they have your best interests in mind – Bear in mind that the majority of the funding that non-profit credit counselors receive comes from the credit card companies themselves, and therefore, they have an incentive to convince you to pay more than you can reasonably afford. Ultimately, it is naïve and foolish to devoutly consider the advice of a credit counselor because they offer non-profit debt relief.