Consumer credit counseling service

A consumer credit counseling service (CCCS) is a nonprofit organization that assists individuals and families in the United States with BUDGETING and credit resolution. CCCSs are members of the National Foundation for Credit Counseling (NFCC), which was established in 1951 by retail credit companies to provide financial counseling and education services. There are approximately 1,300 CCCSs in the country and over 1.5 million households who utilize their services annually.
CCCSs primarily provide debt-management services. In a debt-management plan, individuals document all of their financial liabilities as well as their INCOME and then voluntarily make payments to creditors through the CCCS. Payments are dispersed by the CCCS to creditors, who usually agree to eliminate interest and waive late or over-limit fees for consumers utilizing debt-management plans. Participants normally pay a $30 fee to set up a plan and are charged up to $24 per month to service the plan.
Debt-management plans are an alternative to filing for personal bankruptcy (Chapters 7 or 13), debt-consolidation loans, or home-equity loans. Personal bankruptcy filing is handled through the court system and stays on an individual’s credit history for many years. Personal consolidation loans may reduce INTEREST RATES or monthly payments by extending the length of the loan, but they do not eliminate interest payments. Home-equity loans are tax-deductible and often at a lower interest rate than unsecured personal credit loans, but they use the borrower’s home as security for the loan.
The major source of funding for CCCSs comes from the credit industry. Creditors who participate in CCCS programs contribute an amount equal to 15 percent of consumer payments to the local CCCS. The benefit to credit companies is they get their money back. The benefit to consumers is they restructure their loans into lower and usually interest-free payments that they usually can afford and thus get out of debt. The process also provides education to consumers about the use of credit. Excessive CREDIT CARD debt is a major problem in the United States, especially among young people with little knowledge of or experience in the use of credit.
See also PERSONAL FINANCE.