All non-profit debt consolidation companies must have a Federal 501-C3 non-profit status form on file.
However, the consumer should never use this filing as the only qualification to determine if the company is a true non-profit. Many so-called non-profit debt consolidation company managers advertise this status to attract consumers when they are not actually non-profit.
Creditors fund consolidation firms with voluntary contributions known as ‘Fair Share.’ A few years ago creditors paid firms as much as 10-15% of the payments they handled from consumers. While consumers get credit for 100% of their payment, this funding drop makes it harder for non-profit debt consolidation firms to continue offering their services. To stay in business to help you, most non-profit firms are now asking consumers to contribute a modest additional amount, $5-$20, in the monthly payment to help cover the administrative costs of the debt management program. These payments may be voluntary, and contributions help keep the program active and help others who are in debt retain services.
Let’s say you enroll just five accounts, now that adds up to $25 to $100 per month from you.
That’s $3600 in 3 years, $4800 in 4 years, $6000 in 5 years plus the 15% they receive from your credit card companies. Not too shabby. Also, keep in mind your creditors pay them up to 15% of the payment they receive from you. So you have to wonder, “If they get paid based on the amount I agree too, are they getting me the lowest payment possible?”
Some non-profit debt consolidation companies will retain your first payment. This First payment is a one-time fee equal to the first month’s payment on all debts consolidated. Add that to the monthly fee on each debt.
Additionally, not all debts should be listed because many are non-negotiable.
For example, some student loans, payments to I.R.S., selected Credit Union loans, many department store accounts, foreign creditors, and many others cannot be negotiated. Needless to say, some non-profit companies will include these items because it inflates the retainer or first payment. At a later time, the non-profit debt consolidation company will then inform the client that the creditor has since changed policy and nothing can be done. Of course, you won’t be refunded that portion of the fee. The non-profit debt consolidation company will keep the retainer anyway because they can’t be held responsible for a “change of the creditor’s policy.” Your accounts will be past due, you’ll have creditor late fees, and it stays on your credit.
There is no easy fix for getting out of debt, but at least know your options!
"Non-Profit" does not mean "savings" or "safety" for you. We can help you become Debt Free Quickly, Ethically, & Intelligently. Give us a call or click here.