Credit Counseling Agencies

As more people experience financial difficulties, the Attorney General’s Office is hearing from an increasing number of consumers who are having problems with credit counseling agencies and debt negotiators. Consumers complain that some organizations charge large upfront fees, push them into bogus debt management plans, or fail to provide any financial education. We have also received complaints about companies that claim they will pay a consumer’s creditors on behalf of the consumer, but instead disappear with the consumer’s money, leaving the consumer deeper in debt.

The debt services industry includes a variety of nonprofit and for-profit organizations that advertise they can reduce, eliminate, or settle your unsecured debt. Ultimately, however, credit counseling or debt settlement is not a quick fix to your financial problems, and no company can honestly claim that it can make you debt free overnight.

If you need help lowering your debt, creating a budget, or learning how to manage your finances, credit counseling agencies offer one possible option. However, before you sign up with a credit counseling agency, do your research and consider the following:


Idaho law requires credit counseling agencies to obtain a license from the Department of Finance. Never seek assistance from an unlicensed counselor. Most agencies that advertise on the Internet and on television are not licensed. Go to the Department’s website at to check an agency’s license status.

Range of Services and Qualifications

Look for a credit counseling agency that offers a range of services, including financial education classes and ongoing support. Find a counselor who will review your finances with you in person and help you develop an individual plan to address your immediate problems and prevent future difficulties. Avoid agencies that you cannot meet with face-to-face. Talking over the telephone or chatting on the Internet may be more comfortable for you, but it will not provide the needed one-on-one interaction.

Some credit counseling agencies are affiliated with creditors. Find an organization with counselors who are trained by independent organizations that are unrelated to creditors.

Written Contracts

Never commit to anything over the telephone. Get all promises in writing and read all documents before you sign them. If someone says you must “act immediately,” he or she is lying. It never hurts to consult with a trusted relative or friend about important matters like this. Your best friend might have objective insight that you don’t.


Two types of credit counselors operate in Idaho: (1) nonprofit; and (2) for-profit. Nonprofit credit counselors charge less for their services, making them the better choice for obtaining assistance.
For-profit credit counseling agencies charge a fee for their services and sometimes pay commissions to their employees based on the number of clients they sign up. Before you hire a for-profit agency, get detailed information in writing about all fees you will have to pay and when you will have to pay the fees. If you can’t afford the fees, ask the agency to waive or reduce them.

Do not agree to a plan that requires you to pay any fees before your debt is settled or reduced. A Federal Trade Commission rule prohibits such advance fees by for-profit agencies that sell debt relief services over the telephone. The rule also applies when the consumer calls the company in response to debt relief advertising.

Debt Management Plans (DMP)

Avoid credit counseling agencies that push a debt management plan (DMP) as your only option. In a DMP, you pay money to the agency according to a set schedule, usually monthly. The agency uses the money to pay your credit card bills, student loans, medical bills, or other unsecured debts. Creditors may agree to lower your interest rates or waive certain fees if you are repaying through a DMP.

However, DMPs have a high failure rate and negatively impact your credit rating. You are better off designing a workable budget and taking responsibility for paying your own bills. If you truly cannot manage your own money, consider asking a trusted relative or friend for help in setting up a budget or managing your money.

Some agencies that offer DMPs deceive consumers and steal their money. Others go out of business without paying the creditors. Before sending any money to a credit counselor to fund your DMP, contact each of your creditors and confirm that they accepted the proposed plan.

Once your creditors accept your DMP, it is important to:

  • Make your payments on time.
  • Read your billing statements to verify your creditors are paid according to your plan.
  • Contact the company responsible for your DMP if you are unable to make a scheduled payment, or if a creditor is not paid.

If you don’t make your payments according to your DMP, you could lose the benefits of your DMP, including lower interest rates and fee waivers. Your creditors can charge you more late fees and report to consumer credit reporting agencies that your accounts are delinquent.

Consumer Satisfaction

Before signing up with any credit counseling agency, ask the agency for references and contact the references provided. Contact the Attorney General’s Consumer Protection Division and request a written inquiry report regarding the business. Check with the Better Business Bureau ( for any consumer complaints against the business.

Privacy Issues

Your credit counseling agency will have access to most of your financial accounts and your personal identifying information. Ask the agency how it secures your private information. Security breaches can put you at risk of identity theft or loss through fraud.

What to Do If the Credit Counseling Agency Goes Out of Business

If your credit counseling agency shuts down, you may receive a notice that your DMP was transferred to another company or that your DMP is no longer valid. The notice may come from the agency or from a third party. It is important that you take immediate action to protect your credit:

  • Stop making your DMP payments to the agency and pay your creditors directly.
  • Notify your creditors that the agency handling your DMP is out of business. Ask your creditors whether they will accept the same terms as agreed to under the DMP.
  • Check your credit report for late or missed payments. If you see any problems, contact the creditor and explain what happened. The creditor may be willing to remove the negative notation from your credit report.

Report Problems with Credit Counseling Agencies

If you lose money to a credit counseling agency or believe that an agency has misrepresented its services or engaged in deceptive advertising, you can file a consumer complaint with the Attorney General’s Office.

The Department of Finance also accepts consumer complaints regarding credit counselors, debt counselors, and credit repair organizations. Complaint forms are available at