How Does Consumer Credit Counseling Work?

Consumer Credit Counseling Services (CCCS) offers financial education, budgeting assistance, and Debt Management Plans (DMP) through their network of counseling offices. All CCCS agencies are 501(c)(3) nonprofits.

History of Consumer Credit Counseling Services

The National Foundation for Consumer Credit (NFCC) was founded in 1951 when credit cards were still a new financial product. The NFCC was founded to promote awareness and education of credit and financial literacy.

At the time, credit counseling agencies were largely independent, though most maintained membership to the NFCC. This gave them access to counselor certification, educational materials, and a point of unified negotiation with creditors.

Programs Offered

CCCS agencies offer a variety of services and programs to help consumers manage their debt. To begin with, they offer a free consultation – usually referred to as a credit counseling or debt and budget counseling session – lasting anywhere from 45 to 90 minutes, to review your current financial situation and determine the best method to help.

During this session you’ll receive feedback on how to improve your finances. These sessions can include, but are not limited to, a free review of your credit reports, free budgeting help, an action plan for your next steps, and referrals to tools and resources. Many CCCS agencies also offer education materials and workshops.

At the close of your session, a counselor will advise you on the next steps, which may or may not include a debt management plan (or DMP). If a DMP is the right choice for you, they will work to set up the program with your creditors. Your counselor will contact your creditors in an attempt to reduce your interest rates, remove fees, and create a monthly payment plan you can work with. All of your debts will be combined into one monthly payment that will be made to the counseling agency and they will then pay each of your creditors. Credit counseling agencies may also offer specialized counseling for a variety of issues, including:

• Foreclosure counseling – for consumers concerned about their ability to pay their mortgage
• Student loan counseling – for consumers struggling to maintain their student loan payments
• Bankruptcy counseling – for consumers who have committed to filing for bankruptcy
• Homebuyer counseling – for consumers who are about to purchase a new home

Connect with your credit counseling agency of choice to see what programs and services they offer.

How CCCS is Funded

Most nonprofit credit counseling agencies are funded through a combination of grants and consumer fees.

The largest source of grants is usually government agencies and programs, which often provide funds for specific counseling services. (For example, foreclosure counseling is often provided at no charge thanks to government initiatives that aim to keep families and individuals in their homes.) Credit card companies and other large financial institutions may also provide grants to nonprofits that provide financial education services to consumers.

While most counseling services are free, some may charge a fee – particularly in cases where grants and other outside funds aren’t available.

There are also usually fees associated with the debt management plan. These fees will vary depending on the circumstances of the consumer, but must be affordable and fit comfortably within the consumer’s budget. Typically, fee reductions and waivers may be available if necessary.

Consumer Credit Counseling is a good option for anyone trying to manage their debt. Even if you don’t choose a DMP, you will find the education and resources you need to get out of debt for very little to no cost.