What Is Credit Counseling?
By Jack Campbell Published: 11/14/2008
In a Consumer Credit Counseling Program (also known as CCCS), you will repay 100% of your debt, plus interest and fees. CCCS agencies typically lower your interest rate to a set rate defined by the creditors. The creditors themselves, not the credit counseling agencies, determine the interest rates and payment amounts.
Once enrolled in a credit counseling program, your payments are sent to the CCCS agency, which they in turn distribute the funds to your enrolled creditors.
Consumer credit counseling has a 75% dropout rate*. That means only 25% of people who sign up with an agency tend to stay with the program until they are completely debt free.
While some people choose to drop out and repay the remaining debts themselves, this high dropout rate is also caused by debtors with overwhelming debt who believe a consolidated monthly payment at a lower interest rate will get them out of debt. It will for some people, but doesn’t always work for people with overwhelming debt.
People who drop out of consumer credit counseling typically do so because they can no longer keep up with the creditor-approved monthly payments. You can get kicked out of the CCCS program for missing a payment. Additionally, the law requires that you wait a year before signing up for CCCS program again. So once you leave the program, remaining debt relief options would be debt settlement or bankruptcy.
Consumer credit counseling also may take 6 years or longer to complete. Furthermore, your involvement with a credit counseling service could be reflected on your credit report and can stay there for up to 7 years. Make sure this is the right debt relief option for you before committing to a consumer credit counseling agency.
*The statistic is derived from the report, "Credit Counseling in Crisis," published by Consumer Federation of America, in conjunction with NCLC, April 2003, page 27.CCCSWhat Is A Consumer Credit Counseling Service?
