What is Consumer Credit Counseling Services?
Consumer Credit Counseling Services (CCCS) is a membership organization of local, nonprofit groups set up to assist you if you are having problems with your finances. CCCS is funded by voluntary contributions from consumer finance companies, banks, credit card companies, and other lenders. Under the CCCS Debt Management Program, a CCCS counselor may be able to help you create a monthly budget and payment plan that allows you to resolve your debts over a reasonable period of time.
There are several other nonprofit credit counseling services that provide basically the same services as CCCS (see discussion below).
CCCS counselors are trained to analyze your financial situation and determine whether a monthly budget and payment plan can help. CCCS counselors contact your creditors and inform them that you are seeking help. Many creditors, upon receiving notice from CCCS, will discontinue collection efforts for long enough to allow you to work out a repayment plan through CCCS. CCCS also negotiates with your creditors for reduced payments and elimination or reduction of interest and penalties. Once a plan is approved by your creditors, you send a monthly deposit to CCCS, which then distributes the cash to your creditors. Some creditors may even report your account up-to-date after receiving a few payments from CCCS.
A creditor’s decision to participate in a CCCS plan is strictly voluntary. CCCS cannot force creditors to discontinue collection efforts, reduce interest, waive fees, or report favorable information to credit bureaus. Creditors sometimes revoke lines of credit, including overdraft protection on checking accounts, when they are notified. However, many creditors agree to participate and even fund CCCS efforts, because they know that in many cases, a consumer’s only remaining option is bankruptcy. In bankruptcy, a creditor may receive nothing or merely cents on the dollar. Therefore, CCCS is often a better alternative for creditors.
CCCS requests an initial fee to set up an individual debt management program, but the fee can be waived if you cannot afford it. Thereafter, you will also have to pay a monthly fee to help cover the cost of managing your plan.
When can you use CCCS?
CCCS offers free initial counseling sessions to anyone who is having financial difficulty. Generally, to qualify for a Debt Management Program, you must have an income to fund the repayment plan. You must have at least some money left over after you pay your necessary living expenses, such as food and housing, each month.
If you are having trouble with your finances, it is best to get to CCCS before things get worse and while CCCS has something with which to work. If you can answer yes to three or more of the following questions, you probably should make an appointment to see CCCS:
- Does your current job(s) pay you less than what you need to get by?
- Do you rely on credit cards to pay for items that you used to pay for with cash?
- Do you find it nearly impossible to save money?
- In the past few months, have you had to pay late fees?
- Do you receive monthly bills before the previous month’s bills are paid?
- Do you owe more than you could pay off in two years?
- Do you frequently worry or lose sleep because of your finances?
- Do you find that your account balances are more each month than the month before?
- Have creditors contacted you about overdue accounts?
- Are your credit card bills making it difficult for you to keep up with other bills, such as utility and phone bills?
- Do you have family arguments about money?
- Do you find it difficult to pay more than the minimum monthly credit card payment?
- Have you reached your credit limit on your credit cards?
- Do you use credit card cash advances to pay other bills when they are due?
May reduce or eliminate interest and penalties
CCCS counselors can frequently negotiate with your creditors to reduce or eliminate interest and penalties. This makes a repayment plan more feasible.
CCCS programs are inexpensive
CCCS is a nonprofit group, with banks, credit card companies, and other lenders who recognize the value of its services funding most of its efforts. An initial fee is requested to set up a Debt Management Plan. If a plan can be arranged, you will also have to pay a monthly fee to help cover the costs of managing your plan.
Payments are consolidated into one payment
If CCCS counselors can arrange a repayment plan, you will make one monthly payment to your CCCS office for a period of approximately 12 to 60 months. CCCS distributes the money to your creditors.
Most creditor collection efforts are halted
CCCS has no authority to halt creditor collection efforts. However, many creditors will cease collection efforts if you are participating in a CCCS repayment plan. Some creditors may even report positive information to your credit bureau once they have received several monthly payments under the plan.
CCCS may be able to help you re-establish credit
Some CCCS offices will write credit reference letters for consumers who have successfully participated in a debt repayment plan. This vote of confidence may help you to establish your credit again after your financial crisis has passed. CCCS can also help you obtain and interpret your credit report and give you advice about how to improve your credit record.
CCCS offers other financial services
CCCS offers other services in addition to the Debt Management Programs. They offer counseling for home buyers and sponsor money management seminars. To contact CCCS, check your local phone directory, or call directory assistance for the major town or city closest to your home. Many CCCS offices also maintain websites on the Internet.
CCCS can’t help everyone
If you have too much debt, insufficient income, or unwilling creditors, CCCS may be unable to help you. CCCS cannot force creditors to reduce payments, lower interest, or waive penalties. Further, in order to formulate a repayment plan, CCCS needs a source of funding. That funding comes from you, and, in some cases, it is just not possible to put together a plan. In those cases, CCCS may be able to do little more than refer you to a bankruptcy attorney. If the majority of your debts are related to child support, alimony, or unpaid taxes, then bankruptcy may not even help.
Usually must payoff debts in full
Although CCCS may be able to negotiate with your creditors for reduced payments, lower interest rates, or waived penalties, you are usually required to pay the entire principal balance of your debts over the life of the plan. In contrast, if you attempt a repayment plan in a Chapter 13 bankruptcy case, you may only have to pay your unsecured creditors a portion of what you owe.
Issues regarding conflicts of interest may arise
Many have speculated that nonprofit credit counseling groups have a conflict of interest in the way that they fund their operations. Because creditors provide most of their funding, many believe that such groups are merely collection agencies for the major creditors.
Typically, when a debtor makes a payment of $100 through a CCCS plan, the creditor credits the debtor’s account for the full $100. However, CCCS gets to keep a percentage of that payment to fund its operations, pay its employees, lease its offices, pay for advertising, etc. The more money debtors contribute to a CCCS plan, the more money CCCS collects for itself. Skeptics argue that this arrangement eliminates the incentive to negotiate zealously on behalf of the debtor and, in contrast, provides an incentive to do the exact opposite.
Are there other nonprofit consumer credit counseling services?
There are many other nonprofit credit counseling services operating at the regional and national levels. A quick search though your local yellow pages should provide you with several options. Most of these offices provide the same basic services and have a similar ability to help you out.
CCCS is often thought of as the largest and best known of these services. It is argued that its national presence gives CCCS more clout with creditors. However, while CCCS may have more clout, it will also ask you for a small fee. A few of the other nonprofit credit counseling services don’t request fees at all. Some offer additional value-added incentives, such as 24-hour telephone availability and continued financial counseling after your current debts have been resolved. Many nonprofit credit counseling services offer tele-servicing and can handle your entire case over the phone. You may want to shop around to find the nonprofit credit counseling service that best suits your needs.