Bad Credit Debt Consolidation: Going To A Non Profit Company? Be Cautious |
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Nowadays, almost every bad credit debt
consolidation company adds "a non-profit organization" along with its name. This is to trap you into a false sense of security that you are being helped by an organization that only has your best interests at heart. Isn't it strange that there are hardly any bad credit debt consolidation companies that don't claim to be non-profit? Most non-profit bad credit debt consolidation organizations must qualify with the IRS under a tax code known as §501(c)(3) to be officially non-profit. The requirements for qualifying are ambiguous. The terms and conditions are generic and fit many intents or purposes. There is no in-depth analysis of the tax-exempt status other than the tax returns required. So how do people make money out of a non-profit organization? The answer is simple: through employee salaries. The IRS does not specify limits for the salary other than what is reasonable. Now, how does one define a reasonable salary? Employees of non-profits have their salaries taxed just like employees of any other type of company. All a company has to do to maintain its non-profit status is to show that it isn't making any money. Normal operating expenses of any company include employee salaries, advertising costs, business travel, business meals, and other such costs. Those who manage and control these non-profit firms are obviously in the position of benefiting from the control of all the money they received as donations. Most bad credit debt consolidation companies require a donation, either a flat fee or a percentage of your payment each month to cover operating costs. Did you know that while such organizations may not participate in political campaigns, they are allowed to influence legislation, as long as it is not a substantial part of their activities? Again, how does on define substantial? 50%? 25%? The wording is really too ambiguous to check attempts by bad credit debt consolidation companies to hire professional lobbyists, if they try to do so. Many bad credit debt consolidation companies are not as non-profit as they claim to be. Other common grievances are: companies not making complete payments to creditors, companies making late payments, or not making payments at all. The first thing most so called non-profit bad credit debt consolidation company want is an up front fee. That money goes to the company. What these companies do nowadays is, they've created non-profit bad credit debt consolidation companies and then take their processing and services and put it in a for-profit sister company. Genuine non-profit debt counselors help you learn to manage all your debt, and not just pay off all credit card bills. Many of these fake non-profit bad credit debt consolidation companies even fail to tell consumers that if they don't stick with the program, many creditors won't let them work with another debt counselor for up to a year. But beware! You might end up in worse debt than when you started. While a few companies are genuine non-profit bad credit debt consolidation companies, consumer advocates say that most of them are just trying to turn your debt into their profit. That means the bad credit debt consolidation companies claiming to help you can leave you buried in debt. Most bad credit debt consolidation companies are in a soup these days. They are being sued by several attorney generals, and the FTC and the IRS is investigating their supposed non-profit status, so you need to be extremely cautious. Experts strongly recommend against doing business with any bad credit debt consolidation company, but if you really want to risk your credit and money, check it out with your local consumer protection agency and the Better Business Bureau. So, before you contact a non-profit company, do your homework and find out the truth about the bad credit debt consolidation industry. Or else there's a possibility that you'll end up giving your money to a fake organization, and never get to see it again. |
