Definition
A consumer credit counseling service is any organization that provides credit education and guidance as a central component of its overall educational programs.
Analysis
A consumer credit counseling service is traditionally established as a nonprofit organization that enjoys tax-exempt status under Internal Revenue Code § 501(c)(3). A portion of its donations are provided by creditors that participate in debt management programs that sometimes accompany credit counseling programs.
One of the largest entities in credit counseling is the National Foundation for Consumer Credit (NFCC). The NFCC provides oversight for a network of member organizations, which use the Consumer Credit Counseling Service (CCCS) name in local jurisdictions.
While consumer credit counseling services have traditionally been nonprofit organizations, some credit counseling agencies are actually taxable corporations that rely almost completely on client fees. Some for-profit debt management companies provide an efficient service, but they do not provide substantial education or actual counseling.
When comparing consumer credit counseling services, look for signs that the organization will be able to meet your needs. These are items to look for:
- tax-exempt charity status under IRC § 501(c)(3)–verify status of a charity
- face-to-face counseling in addition to phone or internet counseling
- positive rating with the Better Business Bureau
- accreditation of counselors
- public seminars and other educational outreach
- additional programs, such as:
- family counseling
- housing counseling
- volunteer income tax assistance
Most importantly, make sure that you are comfortable with the reputation of the agency, the expertise of the counselors and the commitment that they have to help you meet your goals. A quality consumer credit counseling service will help you understand your options and assist you with any decision that you make.
