American Consumer Credit Counseling
American Consumer Credit Counseling is a non-profit credit counseling company in business since 1991.
In our research on this company we found a large amount of information about the credit counseling industry as a whole. Most of this research points to this strategy as being ineffective in getting consumers out of debt; and in fact, may put them further in the hole.
Here is an excerpt from consumerfed.org:
Major Problems With Credit Counseling
Not all of the new credit counseling agencies are a threat to consumers. Some are above-board and have pioneered consumer-friendly practices, such as flexible hours, electronic payments and easy access by phone and by Internet. However, as the new generation of credit counseling agencies has gained market share, consumer complaints have risen sharply. The Better Business Bureau reported in 2002 that complaints about credit counseling agencies nationwide had increased to 1,480, up from 261 in 1998. Three types of problems are adversely affecting consumers:
- Deceptive and Misleading Practices. Complaints and government investigations have focused on agencies that do not make consumers’ payments on time, that deceptively claim that fees are voluntary, and that do not adequately disclose fees to potential clients. The last two charges are among those cited by the State of Illinois in its lawsuit against AmeriDebt. Inc.
- Excessive Costs. In an industry that rarely charged for counseling and other services a decade ago, most agencies now charge fees to set up a Debt Management Program (a debt consolidation plan known as a “DMP”) and to maintain it on a monthly basis. Some agencies charge as much as a full month’s consolidated payment-usually hundreds of dollars-simply to establish an account.
- Abuse of Non-Profit Status. Some “non-profit” credit counseling agencies are increasingly performing like profit-making enterprises. Nearly every agency in the industry has non-profit, tax-exempt status. Nevertheless, some of these agencies function as virtual for-profit businesses, aggressively advertising and selling DMPs and a range of related services, maintaining close ties to for-profit firms, reaping high revenues and paying their executives salaries that are much higher than average for the non-profit sector. A survey of Internal Revenue Service (IRS) tax reports on non-profit organizations found numerous examples of lavish executive compensation and apparent windfall revenues. For example, American Consumer Credit Counseling reported paying its president in 2000 a salary of $462,350 plus just over $130,000 in benefits. In that same year, Cambridge Credit Counseling reported a net financial gain of about $7.3 million. In short, some agencies may be in violation of IRS rules governing eligibility for tax-exempt status. Credit counseling organizations should not qualify as non-profit corporations under IRS rules if they are organized or operated to benefit individuals associated with the corporation or if they are not operated exclusively to accomplish charitable or educational purposes.
Although American Consumer Credit Counseling has an A rating with the BBB, they have more complaints than similar companies that have a D rating. This further points to the BBB as a very bad source for true ratings on any company. Further search of the internet turned up numerous complaints about American Consumer Credit Counseling. Most of these complaints centered around the company making payments late on behalf of clients, and creditors not honoring agreements with credit counseling.
In summary, as we do more and more research on credit counseling companies, we are finding evidence that it is no longer an effective program for anyone. Our recommendation is that if you cannot continue to make your minimum payments after tightening your family budget, your best option is a Debt Settlement Program.
On March 17, 2009 ChoiceREVU Editor wrote:
We are giving American Consumer Credit Counseling fairly good marks in comparison to other credit counseling companies reviewed. The reason is their low number of complaints. However, we caution consumers who are considering the non-profit credit counseling model in general due to our serious concerns about the industry as a whole. – ChoiceREVU Editor