The History of Consumer Credit Counseling Services

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People have had problems managing their credit for a long time, but prior to 1951, there were no resources available to assist them. In that year, the National Foundation for Credit Counselling was formed by creditors who initially came together for two primary purposes. The first was to monitor regulatory and legislative activity that affected the credit lenders in their membership base. Their other stated purpose was to produce and promote public awareness campaigns on budgeting, the responsible use of credit and avoidance of bankruptcy.

Although the NFCC was involved in public education efforts, they did not get involved in the collection efforts which their members took against people who owed them money. They served mainly as a trade agency to provide resources for both creditors and the public.

The NFCC was the only credit education agency in existence until the early 1960s when local debt help agencies began to form. These were community based programs which offered credit education and counseling directly to consumers who would meet in their offices for an individualized session. The NFCC continued to operate as a trade organization in which local debt help agencies could voluntarily subscribe to.

After 42 years of being the only trade organization in the consumer credit counselling industry, NFCC came up against some competition with the 1993 formation of the Association of Independent Consumer Credit Counselling Agencies. AICCCA was founded on the basis of "creating industry-wide standards of excellence and ethical conduct" according to the group of financial counsellors who created it.

Unlike the NFCC, the AICCCA was in favour of offering debt management programs to consumers over the telephone in addition to the option of in-person contact. Initially, the NFCC was vehemently opposed to providing credit counselling by telephone, but they did eventually succumb to this business practice. Over time, all types of consumer credit counseling agencies adopted telephonic delivery of their services which was aided by the use of large inbound call centers staffed by trained financial counsellors. Eventually, debt management programs came to be offered over the Internet as well.

Another major shift in the consumer credit management industry came as the result of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This law made it mandatory for consumers filing bankruptcy to seek and complete a course of budgeting and financial management in the six months immediately preceding filing for bankruptcy. The new law required that this program be completed through an approved non profit budget and credit counselling center. In addition to the bankruptcy requirement, the 2005 law also mandated consumers to complete a bankruptcy process course after their filing in order to have their debts legally discharged.

The rise of consumer credit counselling agencies is keeping pace with the demand created by a prolonged recession and increased demand for it services due to the 2005 bankruptcy reform law. Both non-profit and for-profit agencies are reporting an increase in the number of clients they serve, which has helped to level some of the criticism directed at the industry as a whole.