What is Credit Counseling?

The Roots of Credit Counseling Companies

The credit counseling industry developed in the mid-1960’s through the efforts of credit card companies that saw a creative opportunity to recover overdue debts. Creditors created the industry and provided the bulk of the funding needed to keep the agencies in business. At first, most of the agencies were non-profit and called themselves the Consumer Credit Counseling Service (CCCS) of the regions they served. The CCCS agencies were affiliated with the National Foundation for Consumer Credit (NFCC), now called the National Foundation for Credit Counseling. Presently, there are many other types of credit counseling agencies and other trade associations such as the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

The vast majority of credit counseling agencies have been granted tax-exempt status by the Internal Revenue Service (I.R.S.). Yet not all agencies behave like true non-profits. The I.R.S. is currently taking a closer look at this issue and investigating agencies that have non-profit status, but in reality operate like for-profit businesses.

The Woes of Credit Counseling Today

As more Americans seek help for serious debt problems, a new generation of credit counseling companies are exploiting their customers’ vulnerabilities and leaving them deeper in financial trouble. Despite their promises of “debt relief,” these new agencies often harm debtors with bad advice, deceptive practices, and excessive fees. Some “non-profit” credit counseling agencies are performing like profit-making enterprises, reaping high revenues and paying their executives exorbitant salaries.

Consumer Credit Counseling Companies have many names. They are also known as Debt Management Companies, and Debt Negotiation Companies.

All of these types of companies are not regulated by the federal government and only 17 states have any laws that do regulate such businesses. This means that anyone can start up a credit-counseling or debt-consolidation company.

Learn about how credit counseling works >>

Disclaimer: The information provided in this site is not legal advice. All information is general information, some of which pertains to legal issues involved in the subject matter. Credit Matters Inc. is not a law firm and is not a substitute for an attorney or law firm. Your access to and use of this site is subject to additional terms and conditions.

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