How To Deal With Fraudulent Credit Counselling

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How To Deal With Fraudulent Credit Counselling

Written by Bryan Daly
Fact-checked by Caitlin Wood

How To Deal With Fraudulent Credit Counselling

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Credit Counselling Debt Lookout

Everyone accumulates debt at some point, whether it’s credit card bills or mortgage payments. Unfortunately, it can be tough to manage all that debt, which is when you might consider different debt-relief options, like credit counselling. 

Then again, is credit counselling good for you or are credit counsellors actually looking to take advantage of desperate consumers?

Is Credit Counselling Legitimate? 

Generally speaking, most credit counsellors are looking to help consumers dealing with debt and not take advantage of them. It’s a service that can help you access various financial aid programs, such as budgeting courses, debt consolidation products, and creditor negotiations. If necessary, a credit counsellor can refer you to a Licensed Insolvency Trustee who can help you file a consumer proposal or declare bankruptcy. 

Types Of Credit Counselling Companies

In Canada, you’ll find two types of credit counselling agencies: 

For-Profit

As it sounds, for-profit credit counselling means you may be able to get great professional financial help in exchange for service fees.  

Nonprofit

If you’re already struggling with debt, you may prefer a non-profit credit counsellor instead, where no or fewer fees are involved. 

Learn how to prepare for your first credit counselling session.

Why Choosing A Nonprofit Credit Counsellor Is The Right Move

If you pick nonprofit credit counselling, you won’t be charged for any advice, courses or services you accept. Counsellors aren’t out to make money from your debt problems, nor will they judge you because of your financial situation.

Plus, nonprofit credit counselling companies are regulated by the government, so your information will stay private and, with the exception of intensive programs like bankruptcy, you won’t have to provide your credit card or banking details.

Nonetheless, it’s important to carefully research your potential credit counselling company before you apply for any services. This is the best way to avoid fraudulent credit counsellors.

Lookout Are Credit Repair Companies Misleading Canadians?

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LOOKING OUT FOR YOUR BEST INTEREST

Watch Out For Misleading Credit Counsellors

That brings us to our next section; what to look for when it comes to a possible credit counselling fraud. Sadly, there are individuals posing as credit counsellors that will try to take advantage of your situation. Here’s how: 

False Claims

Some fake credit counsellors make claims that aren’t true. For instance:

You are the only one that can repair your finances and pay your debts. The same goes for having information removed from your credit history, which can only be done by Equifax or TransUnion when there’s an error on your credit report.

Pressure Tactics 

A good credit counsellor will never pressure you into buying products or choosing a specific debt solution. The main goal of a credit counsellor is to give you financial knowledge, make suggestions and when necessary, help negotiate with your creditors, or connect you with optional debt management strategies. 

“Debt Consultants” or “Debt Coaches”

Unlike a credit counsellor or financial advisor, there are no requirements to become a “debt coach” or “debt consultant”, which many fake credit counsellors will pretend to be. They may even make outrageous claims that they can magically reduce your debts.

In reality, debt “coach” and “consultant” are vague terms, so you may encounter all sorts of unlicensed “professionals” offering products or services that are plain useless. 

Only a court officer known as a Licensed Insolvency Trustee can help you enter a program (bankruptcy or consumer proposal) that will legitimately reduce your debts. Actually, certain illegitimate companies will charge you to “fix your debt”, when what they’re really doing is connecting you with a LIT, which you can do yourself for zero upfront fee. 

How To Make A Complaint Against A Credit Counselling Agency

Remember, there are federal and provincial/territorial laws that regulate how credit counsellors practice their trade. The government is also responsible for investigating any consumer complaints about credit counselling agencies

If you need to launch a complaint against a sketchy credit counsellor in your region, visit the Government of Canada website for more information and contact your provincial/territorial Office of Consumer Affairs immediately.

Searching For Credit Counselling?

Credit counselling can be helpful when you have debt management problems and there are many nonprofit agencies in Canada that can help you create a budget and tackle your debts head-on. Just make sure your credit counsellor isn’t up to anything shady!    


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