The word "nonprofit" typically conjures up fond memories of groups you've supported in the past, such as your local church, synagogue or mosque; or entities that provide food and housing to impoverished nations abroad or, that manage community centers to give inner-city youth a safe place to go after school to learn job skills, receive tutoring or just have fun.

But nowhere in your reminiscing do you likely conjure up images of organizations that help settle consumer debts.

The truth of the matter is that there are nonprofit organizations designed to help consumers climb out of debt. Startling to some, however, is that these same organizations don't always operate like their philanthropic peers.

In fact, just because nonprofits are exempt from paying certain federal taxes to the Internal Revenue Service (IRS), it doesn't mean they're not turning a profit. That's right - some nonprofit debt relief organizations are making a mint, capitalizing on consumers' desperation in today's hardened economic times.

If you take nothing else away from this post, know this: Just because a company claims it's a nonprofit, it doesn't mean they are not making money.  It just means they don't have to pay taxes on their profits.

A Wolf in Sheep's Clothing?

For someone who's racked up tens of thousands of dollars in debt, late-night promises splashed across the TV are appealing. You see some heroic figurehead, promising to stop creditors from hounding you 24/7 and slash your debt at rates of 40 to 60 cents on the dollar. They often tout service guarantees and sometimes even refund offers.

When that same firm swoops in claiming it's a nonprofit, you feel as if you've struck gold. Who better to partner with than a charitable organization that claims to have your best interests at heart?

Unfortunately, not all nonprofits have your best interests at heart. EVERY non profit not only takes advantage of tax benefits, but they also are paid grants and service fees by the very creditors who are pursuing you.  And yes, they also collect a fee from you... If it seems like a conflict, you're right.

The U.S. Government Accountability Office recently took up the issue and released its findings in an April 2010 report, "Debt Settlement: Fraudulent, Abusive, and Deceptive Practices Pose Risk to Consumers." The report found that some consumer credit agencies (CCAs) "charged excessive fees, abused their nonprofit status, misrepresented the benefits and likelihood of success of their programs, and committed other deceptive and unfair acts." According to the report, the IRS also assessed CCAs "for compliance with the Internal Revenue Code and revoked or terminated the federal tax-exempt status of some agencies."

Despite all the negatively, there are reputable, debt relief firms in operation today, both for-profit and nonprofit. So when choosing a service provider, be sure to adhere to these following guidelines:

  • Understand the Federal Trade Commission's new rules governing for-profits and work with firms that adhere to them. The new rules provide more transparency over how telemarketers of for-profit credit counseling, debt settlement and debt negotiation services operate. Specifically, they require increased disclosures to customers about the cost of services provided and the amount of time it will take for customers to complete debt management or settlement plans. Note that nonprofits aren't required to follow these standards, but CareOne says they should.
  • Confirm a nonprofit's membership in one of the large debt consolidation organizations (e.g., National Foundation for Credit Counseling, the Association of Independent Consumer Credit Counseling Agencies and the Association of Credit Counseling Professionals). Companies affiliated with these organizations are more likely to adhere to professional standards, maintain accreditations and employ certified credit counselors. (CareOne has called on the three largest nonprofit industry associations to comply with the FTC's stringent new rules. Read here for details.)
  • Contact the Better Business Bureau or states attorney office to learn about any consumer complaints and if those complaints have been resolved. Also, seek out recommendations from others whom have gone through the debt settlement process and were successful.

It's OK to Choose a For-Profit Provider

You should feel confident working with CareOne; joining more than 4.5 million people have turned to us for help with their debt. CareOne service providers have years of experience providing sound and legitimate solutions to people looking to conquer their debt.

We offer customized programs that allow consumers to pay off their debt in a reasonable amount of time, and we have a wealth of resources available to help consumers learn how to manage their money and create a secure financial future.

Not only can you count on CareOne service providers for their expertise in debt management, but you can also expect to find customer-focused, helpful and compassionate coaches online or over the phone. Our coaches know the ins and outs of debt counseling and are committed to the success of our customers.

Additionally, we're always working with regulators and legislators to ensure the utmost protection for our customers. And in keeping with our transparent approach to doing business, we will keep you abreast of all the latest news and changes impacting your plans.

Yes, we are a for-profit provider, but we're not, nor have we ever been, in the business of ripping off consumers who come to us in desperation, looking for a real partner to help them claim financial freedom. We are a reputable company that works diligently to protect customers' rights, and remains compliant with all state and federal mandates. Let us help you achieve a brighter financial future.

Related Posts:

Straight Talk on Debt Settlement: Do Consumers Need Debt Settlement?

How Can I Pay Off my Debt?

Understanding Debt Management Plans

Debt Relief: Myth vs. Reality

Questions You Should Ask Before Signing up for a Debt Relief Plan

Mike Croxson

Mike Croxson is the President and Chief Operating Officer for CareOne Services, Inc. He is also a contributing writer to the Straight Talk on Debt blog. He has played an active role in leading change in debt legislation and regulation across the country working to provide better consumer protection in national and state law. From his experience he shares what is happening in the industry and gives you the real story on where things are headed and how it affects consumers

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