Almost every day I get e-mail from some company peddling a get-out-of-debt plan.
One recent advertisement promised I could be debt-free in "3 Easy Steps."
Getting out of debt is rarely easy. The truth is, it can be a painfully long journey back from the purgatory some debt can put you in.
And many folks are overwhelmed with debt these days, much of it because of credit cards. The average credit card debt for U.S. households in 2002 was $8,940.
As more people struggle to make even their minimum payments, they are turning to credit-counseling agencies for help.
These agencies serve as debt middlemen. They negotiate with creditors on a debtor's behalf to, among other things, reduce the interest rate on a credit card and sometimes waive or reduce late fees and penalties. In return, debtors make one monthly payment to the credit-counseling agency, which then forwards the money to creditors.
In the past, credit-counseling agencies rarely charged for their services because they were supported by creditors, who saw the debt plans as a chance to recoup what they were owed.
But so many consumers have signed up for debt plans that creditors have cut back on their funding. Now people signing up for a debt plan are routinely charged a setup fee and a monthly fee. Some agencies charge as much as a full month's consolidated payment -- usually hundreds of dollars -- simply to establish an account.
Most problematic, say consumer advocates, is more emphasis on debt consolidation and less on credit counseling. Instead, there has been a proliferation of agencies that critics call "debt mills," which try to sign up as many people as possible and put them in cookie-cutter debt programs.
If consumers aren't careful, they can end up in worse financial shape than they were in before they signed up for these programs, contends a new report, "Credit Counseling in Crisis," by the National Consumer Law Center and the Consumer Federation of America.
"There are a lot of good credit-counseling agencies out there, but there are also a lot of bad ones," said Deanne Loonin, a staff lawyer for the law center.
The credit-counseling report found that agencies often harm debtors with improper advice, deceptive practices and excessive fees.
Here are some of the typical complaints outlined in the report:
* Debt payments being sent late or not at all.
* Claims that fees for the debt-repayment plan are voluntary when they aren't.
* Excessive fees.
* Failure to adequately disclose fees.
Travis B. Plunkett, the legislative director of the consumer federation, said no matter how desperate you are, take the time to evaluate all your options before signing up with a credit-counseling agency.
"Unfortunately, when people take too long to deal with their debt problem, they often act in panic," he said. "But that can be a big mistake. Take a deep breath. Call around and don't just respond to an e-mail or television ad."
According to the report, these are some reasons to reject an agency:
* High fees. In general, if the setup fee for a debt-management plan is more than $50 and the monthly fee more than $25, look for a better deal. "However, if the agency is offering extra services such as budget counseling or an educational program, it's reasonable for them to charge extra," Plunkett said. "But you don't have to spend hundreds of dollars to find a good credit-counseling agency."
* Unreasonable promises. Creditors, not agencies, determine which concessions will be made, said Lydia Sermons-Ward, a spokeswoman for the National Foundation for Credit Counseling, a nonprofit credit-counseling network. "Any agency that says they can guarantee a reduction in your payments or interest rate is giving you false information." In fact, many creditors are becoming increasingly unwilling to reduce interest rates for consumers who enter debt-management programs. In the past four years, five of the 13 major credit card issuers have increased the interest rate they offer to consumers entering debt plans, according to the credit-counseling report.
* Suggesting services are free. Some agencies will tell you that their fees are voluntary but then will pressure you to pay the fees in full. If that happens, go somewhere else. Don't be pressured to pay. If the agency is vague or reluctant to talk about specific fees, take a walk. There are enough good agencies with low fees that you shouldn't pay an amount you can't afford.
* Too short a relationship. Any agency that offers you a debt-management plan in less than 20 minutes hasn't spent enough time looking at your finances. Keep in mind that even if the agency is a nonprofit, it is not necessarily a do-gooder organization. An effective counseling session, whether on the phone or in person, takes a significant amount of time.
If you need more information, contact the National Foundation for Credit Counseling at 800-388-2227. The member agencies also provide information online at www.debtadvice.org.
Can I give you a little advice? If you're in financial trouble because you're a poor money manager, a debt plan is just a temporary solution to a long-term problem you know you should fix. If you have to use a credit-counseling company, find one that offers some real counseling.
While Michelle Singletary welcomes comments and column ideas, she cannot offer specific personal financial advice. Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or by e-mail at email@example.com.