How Do Not-For-Profit Credit Counseling Companies Get Paid?Even a not-for-profit agency has to bring in some kind of revenue to stay in business. While watching some of those commercials for credit counseling, you may be wondering how not-for-profit credit counseling companies get paid. The answer is actually very simple, but that answer poses another question – who do not-for-profit credit counseling companies truly work for? Business Model of Credit Counseling Companies
All credit counseling companies pretty much operate on the same business model, whether they are “for profit” or not. The only real difference between a not-for-profit credit counseling company and a for-profit one, is the fact not-for-profit agencies generally don’t charge the consumer. Instead, not-for-profit credit counseling companies only get their revenue in a way which definitely raises a few eyebrows. Contrary to popular belief, for-profit and not-for-profit credit counseling companies don’t reduce your overall debt. Rather they negotiate with your creditors to decrease your interest rates. Often these companies manage to have your rates cut in half, sometimes even more. Then the credit counseling company passes along some of the savings to you, keeping the difference. In the end, that’s not surprising – mortgage brokers work in much the same way. Who Do Credit Counseling Companies Work For? On the surface how not-for-profit credit counseling companies get paid does not seem all that atrocious or horrible. Everyone has to make a buck, right? Well the problem is a matter of ethics. How much of a markup are they keeping? Is that markup standardized or mostly arbitrary? Could this be considered false advertising? Nevertheless, creditors are so willing to negotiate with credit counseling companies because they are guaranteed to at least get some profit out of the deal without having to pay a collections department or seek out a collections agency. In the end, it does turn out to be a win-win situation.
Related posts:
Leave a Reply |
