Monday November 14th, 2005

Credit Counselling A Great Alternative To Bankruptcy Credit counselling is a helpful service that is provided in Canada as well as the USA and now in many countries around the world. It can and has, helped thousands of people to get out of debt. However, beware, not all credit counsellors are created equal. Everywhere you look these days someone wants to help you with your financial problems. Bankruptcy Trustees, Credit Counsellors, Debt Counsellors, Money Management Consultants, Financial Consultants, Planners and the list goes on. Suddenly everyone has become a credit or debt help expert, or so they say. The credit counselling industry is one of the fastest growing industries in the country. The problem we are currently faced with is there are few if any regulations to protect you from the “bad guys”. So here are a few suggestions to help you with your search. (Note to readers: The Province of British Columbia, as of July 4 2004, has created a Regulator for credit counselling and they are working on new regulations for this industry). As this unfolds I will keep you posted. Credit Counsellors Friend or Foe - Who is offering Credit Counselling? Credit and Debt Counselling is a speciality area of study and is offered by several types of agencies, however, the counsellors can and do have varying levels of knowledge about the industry. This leaves the consumers on their own to try and sort out where to go for advice. Some credit counselling companies are now selling franchises. So be careful who you deal with, just because it looks like a duck, walks like a duck and sounds like a duck it may not be a “knowledgeable” or “qualified” duck! Some companies like Solutions have Credit Counsellors that are Registered Insolvency Counsellors (RQIC) under the BIA (Bankruptcy and Insolvency Act). Ask about the counsellors qualifications. What makes the counsellor qualified to give you advice about your finances? Having worked in insurance sales or as a financial planner in a bank may not be enough credit knowledge for your specific needs. I suggest that you be VERY careful and do your homework before you make your decision to hire a credit counsellor. If you are in doubt you may contact Solutions by phone TOLL FREE 1-877-588-9491 or over the internet at any time to discuss your needs and have your questions answered. One of our licensed and qualified professionals will be pleased to assist you. Before selecting a credit-counselling agency, interview several. Check with the Better Business Bureau to find out if any consumers have filed complaints about the provider you are considering. Being a member of the bureau may be of assistance, however, it should not be considered mandatory. Consider contacting the Director of Debt Collection for your province to find out more about companies that are licensed and bonded. A credit counsellor is the perfect person to ask about setting up a budget and money saving tips. If you are over burdened with debt or are unable to repay your debt as agreed, a counselling agency may be able to work out a Debt Management Program (DMP) for you. Debt Management Programs are custom designed for people that are experiencing financial strain and for those that wish to avoid filing for bankruptcy. This is not a consolidation loan. Industry licensed Credit Counsellors do not lend money neither do they arrange loans for clients. Nor do they charge you to refer you to a Bankruptcy Trustee or fill out your forms. Beware! If you are currently dealing with such a company – stop! You may wish to seek legal advice – trust me, it will be cheaper in the long run and to your advantage. DMP programs work in direct co-operation with your unsecured creditors and are customized to your meet your specific financial situation. Repayment plans usually cover only unsecured debt (i.e. credit cards, line of credits,) your secured debts (i.e. car, house) should not be included. You must continue to make these payments to your creditors directly. Many creditors will stop or reduce the interest charges for those clients that qualify. Once you are accepted for a DMP you will make deposits each month to the counselling agency to be held in their Trust Account. In turn the agency is required to disperse the funds each month to your creditors. small fee. All credit counselling agencies charge fees, however, most will provide some credit advice or credit counselling free of charge. If you fall behind with your secured debt, work with your counsellor to get this up to date. Most lenders want to work with you if you’re acting in good faith and the situation is temporary. Some secured lenders may reduce or suspend payments for a short time. When you resume payments, however, you may have to pay extra toward the past due total, so ask about any fees charged for these changes. During the initial interview find out their fee, sources of funding, who regulates and audits their operation if there is a board of directors and who are the members of that board. Remember to consider that while nothing is really free – whose interests are most represented and protected by the agency before you agree to any type of repayment plan. Concerning the repayment plan, ask specific questions such as what happens if you miss a payment or your financial circumstances change and the repayment become more than you can afford. Also, how secure is the information you provide. Do not allow the agency to trade any of your information with anyone without your written permission. You should request that you receive status reports at 90 days and that can you access your accounts for a written report at any time. Always get a receipt for any cash money paid. Always make your payments “in trust” to the agency. Counsellors can usually get creditors to lower or eliminate interest and finance charges. Some agencies have multiple plans, which you should ask about. Anyone that is offering “Credit Repair” should be avoided. Credit repair does not exist. If the information on your credit bureau file is accurate, no one can “repair” it so do not waste your money. Tips: A debt management program does not change your credit history. Under the Credit Reporting Act, accurate information about your accounts can stay on your credit report for up to seven years. Ten years in some provinces depending on the information. In most cases credit counselling programs will provide you with an R7 credit rating and will remain on your credit bureau file for two to three years after the completion of the program. All credit counselling programs will have an effect on your credit rating. Creditors may downgrade your credit rating and report to the credit bureau an account that is in credit counselling, payments missed, or that there are write-offs on. A demonstrated pattern of timely payments though a credit counselling program should help you get credit in the future. Think about getting a secured credit card. There are several on the market now in Canada. Home Trust Visa and Horizon Plus MasterCard. Do your homework before you choose a credit counsellor to work for you. You can be assured that a licensed qualified professional will assist you to manage your debts. Ask your EAP (Employee Assistance Provider) if they contract to a company they can refer you to. The employer pays for this service and it is completely confidential so no one, including your employer, will know you have spoken with our counsellors. Solutions provide this confidential service for several EAP programs. If you are experiencing financial difficulties do not wait speak to the professionals at Solutions today. Margaret H. Johnson ACE. RQIC is president of Solutions Credit Counselling Service Inc. and Women and Money Inc. She can be reached by e-mail at mhjohnson@creditsolutions.ca or www.creditsolutions.ca Call Toll-Free in Canada – 1-877-588-9491 or Phone: (604) 588-9491 - Fax: (1) (604) 588-2005 top