Debt management plans help individuals repay debts in a reasonable time frame. In exchange for this planned repayment, creditors will often reduce interest rates and eliminate late fees and over the limit fees.

Legitimate providers are licensed in some states, such as Wisconsin, but there are also unlicensed bad apples consumers need to avoid.

The Federal Trade Commission recently announced proposed settlements against Lighthouse Credit Foundation and related co-defendants for allegedly making deceptive promises to financially strapped consumers. The defendant allegedly solicited consumers using prerecorded phone messages and enticed consumers to enroll in debt management plans.

According to the complaint, the consumers agreed to pay large fees to set up these plans. The company reportedly agreed to pay $2,400,000 back to consumers and to cease making exaggerated claims for huge interest reductions.

"This settlement is good and bad news," said David Aardappel, FISC executive director. "It is good news because this will stop another company from excessive claims and overcharging consumers. It is also bad news because consumers again wonder if debt management plans really offer relief and who they can trust to get debt and credit counseling advice."

In addition to this FTC action, the Internal Revenue Service recently completed audits of 41 credit counseling agencies. The IRS is trying to weed out the quick buck organizations that advertise aggressively, make outrageous promises, and overcharge consumers.

The good news is that there are responsible credit counseling organizations that can help consumers get lasting debt relief. The Federal Trade Commission has published guidelines and questions to ask when choosing a credit counselor:

1. What services do you offer?

2. Are you licensed to offer services in my state?

3. Do you offer free information?

4. Will I have a written agreement or contract with you?

5. What are the qualifications of your counselors? Are they accredited or certified by an outside organization?

6. Have other consumers been satisfied with the service that they received?

7. What are your fees? Are there set-up and/or monthly fees?

8. How are your employees paid? Are the employees paid more if I sign up for certain services?

9. What do you do to keep personal information confidential and secure?

Consumers with unsecured debt, like credit cards, medical debt, cash store loans and personal loans, who are having difficulty making their debt payments, may be candidates for a debt management plan. A responsible organization will honestly answer all of the FTC questions and help consumers understand whether a debt management plan will help them. FISC is licensed in Wisconsin. Consumers can call FISC with questions toll free state wide at 800-366-8161.

FISC is the Financial Information & Service Center Inc., a nonprofit program of Goodwill Industries of North Central Wisconsin Inc.

Alan Prahl is with the Financial Information Service Center Inc. For more information, go to www.fisc-cccs.org. Prahl can be reached at pcbusiness@postcrescent.com.

Source: www.postcrescent.com