Credit Counseling

Topics on this page

• What is a Credit Counseling Agency?
• What is a Debt Management Plan?
• How Are Credit Counseling Agencies Funded?
• How Much Do Credit Counseling Agencies Charge?
• How to Find a Credit Counseling Agency?
• What to expect from Credit Counseling Agency?
• Who Regulates Credit Counseling Agencies in Maryland?
• Filing a Complaint

What is a Credit Counseling Agency?

Credit counseling agencies are organizations staffed by counselors certified and trained in the areas of consumer credit, money and debt management, and budgeting. You can meet with a counselor to discuss your financial situation and develop a personalized plan to solve your money problems.  Most credit counselors offer services through in-person meetings at local offices, online meetings, or on the telephone. Here are some examples of what credit counselors might do: 

• Advise you on managing your money and debts
• Help you develop a budget
• Help you get a copy of your credit report and scores
• Provide educational materials and workshops
• Organize a “debt management plan” to pay down your debts
   

There are both nonprofit and for-profit debt counseling services here in Maryland as well as national organizations that can provide you with advice.

In Maryland, Credit Counseling Agencies are regulated by the Commissioner of Financial Regulation, empowered by the Maryland Debt Management Services Act.

Read the law: Md. Code, Financial Institutions Title 12, Subtitle 9

What is a Debt Management Plan?

If you are having trouble making payments on your debts, a credit counselor may be able to help you with advice or by organizing a “debt management plan” for all your debts. A debt management plan will help you reduce your debt without filing for bankruptcy. Typically, under a debt management plan you make a single payment to the credit counseling organization each month and the credit counseling organization makes monthly payments to each of your creditors. 

Under debt management plans, credit counselors usually do not negotiate any reduction in the amounts you owe. Instead, counselors will work to lower your overall monthly payment by negotiating extensions of the periods over which you can repay a loan and by asking creditors to lower the interest rates and waive certain fees.

A debt management plan will be formalized in a debt management services agreement.  By law, the agreement must contain:

1. your name, address, and phone number;
2. name, address, phone number, and license number of the agency providing the debt management services;
3. description of the debt management services to be provided and any fees to be charged for the services;
4. name and address of the financial institution in which funds paid by you, for disbursement to the your creditors, will be held;
5. schedule of payments that you must make to the agency, including:
   
   1. amount of each payment and the date on which each payment is due; and
   2. an itemization of the maintenance fees that will be retained by the debt management services provider, and the amount of money that will be paid to your creditors, from each payment you make to the agency;
6. list of each participating creditor to which payments will be made, the amount owed to each creditor,; and the schedule of payments the agency will make to each creditor; and,
7. list of your creditors that the agency expects to not to participate in the debt management plan.

The agreement must also include a notice that either party may rescind the debt management services agreement at any time by giving written notice to the other party.

An agency cannot require you to purchase counseling or educational sessions or require a voluntary contribution from you for any services, as a condition of entering into a debt management services agreement. An agency must disclose that they may receive compensation from your creditors for providing debt management services and let you know that entering into a debt management services agreement may impact your credit rating and credit scores. They also must include notice that you can contact the Commissioner of Financial Regulation for the State of Maryland with questions and complaints about the agency. 

Read the law: Md. Code, Financial Institutions § 12-916
 

How Are Credit Counseling Agencies Funded?

Credit counseling agencies may be funded by by individual donations, public and private grants, client fees, and “fair share”. Fair share is a voluntary contribution program for creditors who participate in an agency’s debt management plans.

How Much Do Credit Counseling Agencies Charge?

Credit counseling agencies can charge fees for the debt management services they provide. By law, an agency cannot charge more than $50 for a consultation. Monthly maintenance fees cannot exceed $8 for each creditor participating in a debt management plan, and the total maintenance fees may not exceed $40 per month. 

Credit counseling agencies are prohibited from charging fees for:

1. preparing a financial analysis or an initial budget plan for you;
2. counseling you about debt management;
3. providing you an education program they are licensed to provide; or
4. rescinding a debt management services agreement.
    

Read the Law: Md. Code, Financial Institutions § 12-918

How to Find a Credit Counseling Agency?

Tips for Choosing a Credit Counseling Agency

• Look for an organization that offers a range of services, including budget counseling, and savings and debt management classes. Avoid organizations that push a debt management plan as your only option before they spend a significant amount of time analyzing your financial situation.
• Your credit counselor should take about 90 minutes to fully assess your financial situation before creating a customized action plan to resolve your debts.  Do not just merely fill out an application for a debt management plan.
• Check with the Maryland Attorney General Consumer Protection Office to see if consumers have filed complaints about the agency. (If there are no complaints about them, don't consider it a guarantee that they're legitimate.)
• Your credit counselor should have a college degree plus courses in lending, credit, budgeting, saving and investing, as well as continuing training in home finance and bankruptcy. In Maryland, debt management services providers must be licensed by the Commissioner of Financial Regulation.
• Your credit counselor should not charge you high fees for their services.  There is usually a free initial consultation and only small fees for setting up a debt management plan and for continuing service. If possible, get a specific price quote in writing and understand what you are agreeing to. Do not be afraid to ask questions.
   

Read the Law: Md. Code, Financial Institutions § 12-916

The Federal Trade Commission website has more information and tips on choosing a credit counselor.

Questions to Ask Your Credit Counseling Agency

• Is this agency a non-profit organization?
• How much will these services cost? Are agency services confidential?
• Will they devise a plan tailored to fit your needs?
• Are the counselors certified? Are budget and credit education opportunities offered?
• Will my funds be protected?

Who Offers Credit Counseling Services in Maryland?

Approved credit counseling agencies in Maryland can be identified in the U.S. Department of Justice list of approved credit counseling agencies by state and Judicial district. The National Foundation for Credit Counseling  provides a crisis hotline (1-800-388-2227), on-line counseling, and lists services in your area.  Its website offers tips for how to choose a counselor and manage your finances, and tools for analyzing your situation.  Organizations that are members of the Foundation must be non-profits.  You can also try find a Maryland agency that is a member of the National Foundation for Credit Counseling.

What to expect from Credit Counseling Agency?

What Do You Need to Bring?

You need to bring your pay stubs, loan information (including the contact information for your creditors) and credit-card statements.  You may also need to fill out a budget form that provides information of where you are spending your money so your counselor has a clear picture of your financial situation.

What Type of Solution Can You Expect?

Typically, the credit counseling agency will create a debt management plan and help you get it approved by your creditors.  Once your creditors have approved your plan, most of them will stop charging you additional interest and work with you to reduce your debt.

 Tips About Debt Management Plans:

• If you decide to use debt management services, then you should have a written agreement with the debt management services provider. 

• Make sure you that your debt management plan only includes the appropriate debt, and especially make sure that you do not include your mortgage.

• Make sure you reset your payment schedule with your creditor if you are going to pay them once a month so you will not incur late charges and fees.

• If your debt management plan consolidates your bills into one payment, do not apply for more credit, or try to open a new credit card.

• Make sure your creditors have accepted you for a debt-management plan before you stop paying your bills.

What Can You Do if You are Not Satisfied with Your Agency?

If you are unsatisfied with the service provided by your credit counseling agency you can transfer to a new one by setting up a new debt management plan.  It is important that you notify your creditors that you are switching credit counselors and that you need their approval of the new debt management plan.

Read the Law: Md. Code, Financial Institutions §§ 12-916 to 12-920

Who Regulates Credit Counseling Agencies in Maryland?

The Maryland Division of Financial Regulation is the primary regulator for consumer credit counseling agencies. The Division provides a forum for the resolution of consumer complaints concerning questionable credit practices involving businesses that it regulates and participates in consumer education and community outreach programs.

Filing a Complaint

The Commissioner of Financial Regulations investigates complaints involving credit counseling agencies. Complaints serviced by the Commissioner's office are from Maryland residents only. A complaint must be in writing, and must include the complainant's name, address and telephone number and a brief, but accurate, explanation of the problem and state your desired result. Also include any documentation to support your complaint that will help the agency to resolve the complaint more quickly. Do not send original documents, only send copies. Complaints usually take about 30 days to resolve.

Filing a complaint:

• E-mail: DLFRComplaints-LABOR@maryland.gov
  Be sure to attach the complaint form and supporting documentation.

• Mail: Office of the Commissioner of Financial Regulation
  ATTN: Consumer Services Unit
  1100 N. Eutaw Street, Suite 611
  Baltimore, MD 21201

• Facsimile (fax): 410-333-3866
  Mark your fax to the attention of the Consumer Services Unit.

• In-person: Appointments are available to hand-deliver documents or for virtual meetings with Financial Regulation staff through a video-conference kiosk at their offices. To schedule an appointment online, please visit the Office’s online scheduling system.

You can also contact the Commissioner of Financial regulations if you have a question or do not wish to file a formal complaint. Contact the Consumer Services Unit by email at DLFRComplaints-LABOR@maryland.gov or by phone at 410-230-6077.