Complaint Review: Poineer Military Lending

CCC and other "non-profit" credit counseling agencies will hard sell a consumer that they have "agreements" with creditor nationwide. The truth is, few if any creditors, have individual agreements with credit counselors.

Most creditors view credit counseling agencies as a simple extension of their collection department. Almost all consumers that contact these agencies are already in trouble financially or are aware they soon will be. The creditors have guidelines with which they deal with these accounts, the guidelines apply to all credit counseling agencies that contact them.

You (the consumer) contact the credit counseling agency and fall for the sweet smelling sales pitch of how you will quickly be out of debt, all your creditors have agreements with them, yada, yada, yada... You sign up and almost always agree to deductions from your checking account within one month of enrolling.

What you are not told. When your account is activated (sometimes not before a payment is received) the agency sends a form letter (by mail or electronically) to each creditor. The creditors generally have a very small staff devoted to dealing with these "proposals" and it can take 14 to 60 days for them to address the individual proposal. The proposed payment is based on the creditor guidelines set on the balance you provided to the agency WHEN YOU ENROLLED. In almost all cases your account with the creditor will cycle, your balance will increase due to a payment due and not received, late or overlimit fees - the new balance requires a higher payment to be accepted into credit counseling status by the creditor. The proposed payment is insufficient, therefore in about 75% of the cases it is rejected and the credit counseling agency is notified of the new required minimum payment.

Now, the agency must process the new request, notify you (usually by mail) and wait for your response to increase the payment amount. There is a high likelihood by the time the agency processes the creditor request, notifies you, receives a response, deducts the next month's increased payment from your checking account, that your account with the creditor has again cycled. New late fees, new balance, the payment is again insufficient, the new proposal is rejected.

This scenario can occur for 2-3 months before the credit counseling agency gets the proposed payment correct. In many cases the creditor is now prepared to charge off the account and the payment plan is not accepted.

Pioneer, like many personal loan lenders, normally does not accept credit counseling plans. One, they know how inefficient most of these agencies are in processing payments in a timely manner and how high the drop out rate is for consumers. Most consumers find they continue to receive constant calls from collectors, accounts are often charged off, interest rates that were previously high are not increased to the highest limit.

The consumer's credit profile is ruined. Almost all future lenders will view a credit counseling entry on a credit profile as being as close to bankruptcy as possible. You have now entered the subprime category for lending if you are approved at all. The truth is, you are almost better off going bankrupt, at least you have a fresh start.

The credit counseling agency does nothing that you cannot do with self discipline except the occasional success stopping collection calls and lowering some interest rates. The theory is to set a monthly payment amount. Divide it among creditors. Over time smaller creditors are paid in full - the payment amount remains the same, the money formerly paid to the smaller creditors is now moved to the larger accounts. By the final months, your monthly payment is the same, it simply goes to the one remaining creditor.

Rethink credit counseling, it is certainly not your best option.