Credit Hotlines Are Open, Yet Phones Are Silent

Article excerpt

Byline: Candice Choi Associated Press

NEW YORK-- Toll-free numbers for nonprofit credit counselors began appearing on credit card statements more than a year ago. Yet counselors say the phones aren't ringing.

It could be that cardholders simply don't bother checking their statements. Or they may fear reaching out for help would be futile, or even damage their credit scores.

Whatever the reasons, the National Foundation for Credit Counseling says its member agencies received a mere 150,000 calls from credit card statements. That's despite the phone numbers having been printed on 500 million statements since February of last year.

The inclusion of the phone numbers was part of the sweeping credit card regulations known as the CARD Act. In addition to banning numerous billing practices, the law required the revamping of statements to make clear the interest costs of carrying a balance. The idea was to help borrowers get debt under control.

Credit counseling agencies offer assistance on a broad range of financial matters. You can turn to them for basic help, such as drawing up a monthly budget. Or you may need more urgent guidance on how to prevent bankruptcy or foreclosure.

"I don't want to imply that we've got a magic wand," said Gail Cunningham, spokeswoman for the NFCC, based in Washington, D.C. "But even if we can't resolve the problem, we can provide a written action plan or suggest where they can go for the right help."

Counseling can take place over the phone or in person, although the majority of borrowers opt for phone counseling. A session might take about an hour and, depending on the help being sought, you'll likely be asked to bring financial information such as pay stubs and various bills.

One of the flagship services is a debt management plan, or DMP. This entails the agency acting as a go-between with credit card companies to work out terms for you to pay off credit card balances.

The balances won't be reduced. But card companies may waive penalty fees or lower interest rates as part of the agreement.

For those in the most dire financial situations, some credit card issuers will stop charging interest. But more often interest rates are lowered by roughly half to around 10 percent, said Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies.

Once you and your creditors sign off on a debt management plan, you make a single monthly payment to the credit counseling agency. The agency then disburses payments to your various creditors. …