Just who or what are Consumer Credit Counseling Services? Are they just wolves in sheep's clothing? Let's have a look and see if dealing with a CCCS (the acronym) can help you out of debt.
First of all, "Consumer Credit Counseling Service" is the name given to most member agencies of the NFCC, or National Foundation of Credit Counseling. The NFCC boasts over 100 members with over 800 offices across the United States. Its members are all non-profit organizations that are dedicated to providing you with low or no fee credit counseling, and if necessary, a debt management plan or DMP. (Yes this industry likes its acronyms!)
When I pose this question my intent is not to scare you away from seeking credit counseling. But, you should be aware that all may not be what it appears when it comes to these type of debt relief organizations.
First of all, the NFCC was founded almost 60 years ago (1951 to be exact) by a group of credit lenders. The intent was to act as a trade group for creditors as well as help educate the public about credit. Fast forward to today. Take a guess at who are the biggest donors to these CCCS's?
That's why I say "wolf in sheep's clothing". Here you are seeking help from organizations that are funded by the creditors that hold the very debt that you are trying to pay off! Of course this begs the question, whose best interests are these agencies serving?
And not only do the credit card companies donate large sums of money to these credit counseling companies, they pay these debt counselors a percentage of any money that they help consumers repay through their debt management / consolidation programs. That's right, a kickback.
Why do the credit card companies do this? Well, I have said this
times and I will say it again. The people who run credit card companies are not stupid.
They know that if
one of their customers are struggling to repay their
credit card debt, it is much better if they get help in the form of
credit counseling and a debt management plan than trying to go it
alone. They (the companies) are willing to forgo some of the debt (in
the form of a kickback to the CCCS) and sometimes interest (if they
offer a lower rate to a consumer in a DMP) in order to increase the
odds that the debt will be paid back over time. The alternative is that
the customer may declare bankruptcy, in which
they would be out the entire amount owed to them.
Should you be wary? Well, you should certainly be cautious. And you should shop around for a credit counselor. Don't just go with the first one you get in touch with. Consumer Credit Counseling Services/Agencies will have different fees, provide different services and have different debt relief options available.