How is California Debt Settlement different than Credit Counseling?
A common question that I get asked is how Debt Settlement in California is different from credit counseling. The answer is that Debt settlement is different from credit counseling in that Debt Settlement actually lowers the amount of debt that gets repaid.
On the other hand, credit counseling programs do not negotiate your balances down. Instead Credit Counseling will reduce only your interest rates. Also, not all creditors will give you a lower interest rate.
There is data that shows fewer people graduate from Credit Counseling programs because the payments are simply too high. In fact, payments through Credit Counseling are usually about the same as the minimum payments that you are currently paying. It's important to point that many credit counseling companies claim to be non-profit. In fact most credit counseling companies are paid by the creditors and treated as collection arms of the creditors. This means that the credit counseling companies earn most of their money from the credit card companies. This gives room for conflict of interest and means that the consumers interests may not be top priority.
In the past, many Credit Counseling Companies have had their non-profit status revoked by the IRS.