Credit Counselling: guidance for debt management

What does credit counselling refer?

It is the service which provides support and guidance to the customer on debt management, money, budgeting and consumer credit. The main objective of all credit counselling services is to provide essential fundamental financial education on managing the cash and ways to avoid bankruptcy. Many services negotiate with the lenders to decrease their late fees and interest rates, on behalf of the debtor. It is said that the borrowers who have a basic understanding of credit management are assets for the creditor as well. 

It is also named as Debt counselling in the United Kingdom. This counselling is done by agencies that have the power to speak and negotiate on behalf of the debtor. This right is provided to the creditor through a contract signed between both parties. These agencies can be non-profit or for-profit depending on the fees they charge from debtors (non-fee rates and high costs, respectively). Regulations on credit counselling and respective agencies change county to country and sometimes vary within regions of countries.

Breaking down credit counselling

Reputable agencies have well trained and certified staff to provide counselling services. These instructors discuss the financial situation of clients and help them to generate a personalized model to eradicate their economic issue. An initial session generally lasts about an hour with various follow-up sessions if asked. A reputable agency always provides free information about its organization and services it gives. So, a debtor should keep this in mind before releasing any detail about their condition. 

Credit counselling services

Many counselling firms offer services through an online application, local offices and on mobile phones. Various military bases, universities, housing authorities, credit unions and branches of the United States Cooperative Extension Services work for non-profit credit counselling. Consumer protection agencies and local financial institutions also provide referrals and good sources of information. 

However, non-profit counselling agencies do not promise affordable, legitimate and free service. There are other firms which charge a high fee and hide this amount whereas; others may request their customers to make a voluntary donation to their charitable firm, which leads to additional debt. 

How to find a credit counsellor 

The Association of Independent Consumer Credit or The National Foundation for Credit Counselling provides legal credit services across the U.S. Also, customers can check its complaints and their response with their domestic consumer protection agency and state's attorney general office. The United States Trustee Program provides the list of approved counselling agencies for providing pre-bankruptcy counselling. It is essential to know about credit counselling before filing for the case of bankruptcy. 

If one faces a financial problem where it is hard for him to repay the debts or his debts increase too much, the counselling agency advises him to enrol in the debt management plan. After looking into the whole financial situation, the counsellor will give some money management advice to the debtor, which will help him to mitigate the condition to some extent. This advice includes a DMP design, which is unique depending on the circumstances. 

Regulations by country:

United States

In the United States, these credit organizations are roughly regulated by the FTC (Federal Trade Commission). It is the protection agency of the U.S that sue the firms that have deceived debtors about the nature, cost or benefits of their services. The attorney's general primary function is to protect the citizens from any fraud, and different states have the power to regulate DMP's individually. Two professional organizations represent the credit counsellors: the Association of Independent Consumer Credit Counselling Agencies and the National Foundation for Credit Counselling. 

United Kingdom

The Financial Conduct organization in the United Kingdom is responsible for regulating consumer credit and for establishing a debt. In case of improper conduct, the fine is charged by the Management Plan Protocol. 

European Union

In Sweden, the guidelines are roughly provided by the (TOC) Swedish Confederation of Professional Employees and lenders are advised to take the instructions seriously. 

In Ireland, the ICTU or Irish Congress of Trade Unions provides the information regarding the debt resolution directly to the purchasers.

In Latvia, a company known as LAKRA provides information regarding debt to the indebted employees. 

South Africa

The NCR or National Credit Regulator established under the credit act number 34 in the year 2005 is the prime credit regulatory authority of South Africa. Its task is to carry out policy development, research, and education, registration of industry participants, ensuring the enforcement of various acts and looking through the complaints. It also looks into the registration of credit providers, debt counsellors, credit bureau and enforcement of agreement with the bill. 

The credit counselling was enforced or introduced in 2007. It enables the over-indebted customer to take help under the National Credit Act. This act has been changed many times since it came into existence with the addition of new regulations. 

Canada

The FCAC or Financial Consumer Agency (Canada) recommends their citizens to look for the trustworthy and well-qualified counselling organizations. It is advised by FCAC to research before selecting a firm and checking whether the agency fulfils the criteria of national and provincial association. 

Criticism

Criticism of credit counselling (globally) comes mainly from predatory practices that take advantage of already struggling debtors. It includes charging unreasonable or unlawful fees, fails to meet the desired standards, and fails to provide affordable solutions to debtors and not to update the customers with the free debt services available outside.

Bottom Line

So, think before investing or borrowing the money from fake creditors and brokers. Always opt for a trustworthy brokerage firm which is regulated by a proper financial body of the respective country. One of the brokers in this list is ROinvesting. 

It is a brokerage firm regulated by CySEC and provides trading on any device with a high level of data security and best customer support services.