Some Nonprofit Credit Counseling Services Will Scam You Into Thinking They Are Not In It For The Money

Many people purposefully go looking for nonprofit credit counseling services when they seek debt help. And I am sure their reasons for this vary from person to person. But I can almost guarantee you that two of the main reasons are:

1. They perceive that the service will be cheaper or even free. After all, the company is not making a profit, right?

2. They perceive that the company will be trustworthy and reliable. After all, they are a charity, right?

Let's address the first reason. (After which, addressing the second reason will be redundant.)

Are Nonprofit Credit Counseling Services Free, Or At The Very Least, Inexpensive?

Just because a company is registered as a "nonprofit" does not necessarily mean that they do not generate revenue through the sales of services and/or goods. Many companies need revenues in addition to any outside donations they receive in order to pay employees and cover many other operating expenses. And the credit counseling business is no different. Even nonprofit credit counseling services need to generate revenues.

And the truth is, that even though most nonprofit debt relief organizations charge fair and reasonable fees to help cover expenses (not to make a profit), there are some who are just down-right scammers. These companies hide behind their "nonprofit" status and prey upon people's trust in such organizations.

But what is the point of them doing this you ask? After all, they are not allowed to earn a profit. So why would they try and generate more money than they need to pay employees and expenses?

Well, the fact is that these scammers (the people who run the non-profit consumer credit counseling companies) find ways to line their own pockets with what would normally be considered profit in any other business. And there are two basic ways that they do this.

  1. They pay the executives (ie. themselves) exorbitant salaries that are well above what would be considered the norm in the credit counseling industry.
  2. They funnel business from the nonprofit organization to other "for-profit" companies that are owned by, guess who, the executives of the nonprofit. These for-profit companies sometimes handle the administrative side of the credit counseling business, or are sometimes debt settlement companies which provide a different service than credit counselors/debt management companies. By funneling consumers to affiliated debt settlement companies they stand to make huge profits.

Now, remember when I said that once we discussed reason #1, reason #2 would become redundant? Well, as you now know, just because a company is "nonprofit" does not mean that it is automatically trustworthy or reliable. Nor does it mean that it is a charity.

Should You Avoid Nonprofit Credit Counseling Services?

No more so than you should avoid a for-profit credit counselor. The one thing I tell people over and over is that getting out of debt starts and end with you. You have to first assess your financial situation and your spending habits, and then make the changes necessary in your life to start being able to pay down your debts. Preparing a strict budget and sticking to it is paramount. And if you need help with these things, then yes, seeking out the help of a professional credit counselor would be a wise move. Just make sure that you do your homework, ask the right questions, and find out everything you can about any programs they recommend before you sign on.