Credit counseling was a service originally provided to consumers by non–profit organizations like The National Foundation for Credit Counseling and its affiliates, Consumer Credit Counseling Services. These organizations worked as a liaison between consumers and credit card companies, negotiating lower interest rates and monthly payment plans for consumers that were falling behind in their payments. By the late 90’s, a rapidly rising level of consumer debt started bringing hundreds of opportunistic new companies in to the competition to provide similar services on a “for-profit” basis. Many of these new for-profit companies titled themselves as credit counselors and positioned themselves to ride on the coattails of the better known non-profits while operating with huge advertising budgets and executive salaries.  While both for and non-profits are compensated by credit card companies who return a percentage of the consumers’ payment as a fee, the bigger budgets of the for-profits are typically covered by negotiating larger percentage returns than the non-profits. 

Many firms that label themselves as credit counselors are actually operating in areas that aren’t considered to be credit counseling at all. These companies will have referral agreements with bankruptcy attorneys, mortgage brokers, and real estate agents which may or may not be disclosed to the consumers using their services. They have also been known to offer debt settlement services under the guise of credit counseling.      

Credit counseling has changed drastically over the last ten years due to the companies that now populate the category. While many are reputable and do good work for their clientele there are always the “bad apples” that operate to benefit themselves at the expense of their customers. If you are thinking about going to a credit counselor, do your due diligence on the companies that you are considering. Another option is to contact an affiliate of the National Foundation for Credit Counseling in your area.