Sometimes it can be difficult to distinguish a reputable nonprofit credit counseling agency from a dishonest for-profit firm that embezzles clients' money, charges excessively high fees, and/or keeps clients' initial payments instead of prorating them among their clients' creditors. This is especially true when for-profit firms use words like "service" or "foundation" in their company name.
One way to distinguish a reputable nonprofit credit counseling agency is to ask if it receives funding from a local United Way or similar organization. Another is to check if it is state-licensed (in states that license credit counselors). A third way is to check whether a counseling agency is associated with an industry trade organization such as the National Foundation for Credit Counseling. See www.nfcc.org for additional information. Finally, you can tell if a credit counseling organization has nonprofit status by reviewing its 990 Form online at www.guidestar.com. All 501(c)(3) nonprofit organizations are required to file this form annually with the IRS.
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