American consumer credit counseling11/23/2023 ![]() It can impose fines for improper conduct. ![]() In the United Kingdom, the Financial Conduct Authority is responsible for the regulation of consumer credit and has established a Debt Management Plan Protocol. Two professional associations represent Credit counselors: the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies. Different states may regulate DMPs individually and Attorneys General are empowered to protect state citizens from fraud. In the United States, Credit counseling agencies are loosely regulated by the Federal Trade Commission (FTC), the nation’s consumer protection agency, which can sue companies that have deceived consumers about the cost, nature, or benefits of their services. These practices include failing to meet required standards, charging unlawful or unreasonable fees, failing to provide affordable solutions for consumers, and neglecting to make customers aware of free debt services available elsewhere. Global criticism of credit counseling comes primarily from predatory practices that take advantage of debtors that are already struggling. ![]() The Debt-snowball method is a budgeting approach that addresses debt systematically. Another option is Debt consolidation, in which one new loan replaces multiple unsecured credit debts. ![]() Ĭredit counselors can sometimes negotiate debt relief, where part or whole of an individual debt is forgiven. The debt was then ‘‘consolidated’’ into a single payment. In order to initiate a DMP, a consumer would authorize the credit counselor to contact each of the consumer’s unsecured creditors and negotiate with each creditor to lower the consumer’s monthly payment amount, to lower the interest rate, and to waive any outstanding late fees. In addition to education, a popular credit counseling option is the ‘‘ Debt management plan’’ (‘‘DMP’’, known in the United Kingdom as the Individual voluntary arrangement or "IVA"). Credit counseling includes an array of services to address consumer debt that is not within the debtor's ability to pay, such as education about credit personal finance, budgeting and debt management. Īlthough there is variation from country to country and even in regions within country, consumer debt is primarily made up of home loans, credit card debt and car loans. The modern practice known as ‘‘credit counseling’’ was initiated by creditor banks and credit card companies during the mid-1960s to address the growing volume of personal bankruptcies. In the United States, the National Foundation for Credit Counseling was established in 1951. In the United States, individuals filing Chapter 13 bankruptcy are required to receive counseling. Regulations on credit counseling and Credit counseling agencies varies by country and sometimes within regions of the countries themselves. Some of the agencies are non-profits that charge at no or non-fee rates, while others can be for-profit and include high fees. Credit counseling is most often done by Credit counseling agencies that are empowered by contract to act on behalf of the debtor to negotiate with creditors to resolve debt that is beyond a debtor's ability to pay. Credit counseling (known in the United Kingdom as debt counseling) is commonly a process that is used to help individual debtors with debt settlement through education, budgeting and the use of a variety of tools with the goal to reduce and ultimately eliminate debt.
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