There are literally thousands of debt relief and credit counseling companies that constitute a thriving, $7 billion dollar industry geared towards helping consumers who are struggling with their debt. But are all of them legitimate? The short answer: NO!

‘Caveat emptor’ or ‘let the borrower beware’ probably holds true of any industry, but especially so in the financial services sector. While there are no hard facts to support this, my sense is that for every legitimate debt counseling service that arrives on the scene, three fly-by-night debt counseling services are also spawned.

According to a post on MSN Money titled The consumer’s guide to credit counseling, poster Liz Pulliam Weston offers the following red flags to be on the lookout out for

• Big upfront fees. Consumer Credit Counseling Services typically charge a $10 set-up fee. If you’re paying a lot more, you may be the one who’s getting set up, unless you’re getting extensive and personal money coaching that could justify the fee.
• No accreditation. Legitimate credit counseling firms are affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.
• Delayed or missing payments. Some companies pocket your first months’ payments as a fee, rather than passing the money on to your creditors. Missing payments can hurt your credit rating. Find out how much of each monthly payment is going to your creditors, and when it will be sent to them.
  
• Unrealistic promises. Some companies falsely promise that you can settle your debts for little or no money, without hurting your credit rating. Legitimate credit counseling services help you pay back what you owe, albeit at lower interest rates, and acknowledge there may be some affect on your credit rating and ability to obtain new credit.

Above all, let common sense be your guide. I have said it here a hundred times before and I will shamelessly continue to say it: If it sounds too good to be true, it is.

Read the entire post at MSN Money.

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