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Debt Management Through Consumer Credit Counseling

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Most Consumer Credit Counseling Services charge a monthly service fee. Even non-profit organizations require funds in order to conduct business and to provide services. Because some creditors make voluntary contributions to non-profit Consumer Credit Counseling Services, the monthly service fee is typically set relatively low in comparison to the services being provided. In most cases, the monthly service fee ranges from $20 to $50 and the method used to calculate the fee varies within agencies. Oftentimes it is based on the total amount of debt or number of accounts being placed in the program, or a combination of both. In addition, the fee may be regulated by state law.

It must be noted, however, that many creditors have reduced their voluntary contributions substantially and many creditors will not contribute at all. At the same time, with new regulations, many creditors are taking a tougher stance and offering less forbearance to their customers who enroll in a Debt Management Program.

In addition, creditors are imposing strict guidelines and conditions for enrollment not only on the debtor, but also on Consumer Credit Counseling Services. New procedures are now required on how clients are enrolled, how proposals are made, how client payments are disbursed and how agencies are run. The effect of this has greatly increased the operating cost for ALL agencies, while at the same time reduced the amount of financial support previously provided by the creditors. The new Bankruptcy Act also imposes many regulations that agencies must now follow.

Notice: There are Consumer Credit Counseling Services which are for-profit companies. Consumers should avoid these agencies as there is seldom, if ever, any benefits using them as opposed to going through a non-profit agency. In most cases, clients are provided with less forbearance and are charged higher fees.

Attorneys who offer a debt management program typically act similar to a for-profit credit counseling agency. Some attorneys, however, may truly negotiate with creditors in an attempt to settle their client's debt. It should be noted that most attorneys who negotiate debts work on the debtor's behalf and usually charge an hourly rate. This rate is typically charged regardless whether a favorable settlement is reached or not. While this may prove favorable to the client, it may also be costly to the debtor.

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