RKL vs. Debt Programs

How is RKL Financial different from Buffalo Consumer Credit Counseling, Rochester Consumer Credit Counseling and the Consumer Proposal Plans in Canada?

What about consumer credit counseling?

  • They do a great job if you have lots of credit card debt.
  • For purposes of getting a mortgage, it shows on your credit report as if you filed bankruptcy.
  • They don't address the problem of spending too much.

You can develop a payment plan on your own. A consumer credit counseling service cannot teach you to manage money, which is what you need to learn.

What about debt consolidation or companies that promise to clean up my credit?

The truth is that you cannot borrow your way out of debt! You've probably seen the commercials for companies that claim they can clean up your credit for you.  There are two basic problems with them:

  • For purposes of getting a mortgage, going through companies that take your money and pay your bills will reflect on your credit as if you filed a Chapter 13 bankruptcy.
  • Only transactions 7 years or older or a mistake may be taken off your credit report. A company that says otherwise is lying to you.

Most debt consolidation companies claim to be nonprofit, but they make a lot of revenue at the expense of their clients. These companies charge clients in several different ways. Some charge a percentage of the payments made to the lenders. Some keep the first one or two payments for "administration costs," which can cause the client to be considered delinquent by the creditor.


You have $20,000 in unsecured credit card debts. You owe $10,000 to one credit card company, $7,000 to another one and $3,000 to a third one. You agree to contract for a five-year debt settlement plan where you pay $250 a month to the settlement company.

Sounds good, right? After all, $250 a month for five years is only $15,000, so you're saving $5,000, and you'll be debt-free in just five years, right?

Let's examine this arrangement a bit closer. The admin fee will cost you $750 up front. Your first three monthly payments go toward that admin fee and nothing gets put into your trust account until your fourth monthly payment has been paid. The settlement company takes the first $50 of your $250 payment every month as the service fee. That means that only $200 a month is actually being added to your trust account.

Most debt settlement companies will claim to be able to settle your debt for about half of what you actually owe, so let's use the middle credit card debt as an example:

If you owe $7,000 on the account and the creditor agrees to accept $3,500 as payment in full, it will take you eight months at $200 per month to have accrued enough cash in your trust account to pay off just that one credit card bill.

But remember, your first three payments to the debt settlement company only paid the $750 admin fee. That means your first credit card isn't really settled until 11 months after you started sending them money! So what is the problem? It's really very simple—your creditor won't agree to accept half of your actual debt amount in settlement unless, or until, that amount can be paid in full. Otherwise, they'll expect you to make your normal monthly payments.

Myth vs. Truth

Myth: The debt management companies on TV, like Consumer Credit Counseling Service, will save me.
Truth: You may get out of debt … but only with your credit trashed.

Debt management companies are springing up everywhere. These companies help "manage" your debt by taking one monthly payment from you and distributing the money among your creditors, with whom they've often worked out lower payments and lower interest. This is not a loan as with debt consolidation. Sometimes people get the two confused. However, because Americans are up to their eyeballs in debt, the debt management business has become one of the fastest-growing industries today.

Companies like Consumer Credit Counseling Service can help you get better interest rates and lower payments, but at a price. When you use one of these companies and then try to get a Conventional, FHA, or VA loan, you will be treated the same as if you had filed Chapter 13 bankruptcy. Mortgage underwriting guidelines for traditional mortgages will consider your credit trashed, so don't do it. Real debt help is found only in changing your behavior.

RKL Financial works with you to teach you to-do the same things that the debt management companies are doing, while utilizing the Debt Snowball to pay off your debts. Our main focus is on HABIT CHANGES not quick fixes. If you do not change your spending habits then the debt will come right back into your life after a debt management program has been completed.