Prior to 1951, people who were in debt and looking to consolidate bills had few options since there were no credit counseling agencies in existence yet Uces. Credit grantors were actually the first people to suggest such an organization when they formed the National Federation for Credit Counseling (NFCC) that year. The original intent of the NFCC was to monitor legislative and regulatory activity for the benefit of its retail members. As far as consumers were concerned, the only thing the NFCC originally participated in was public education to promote financial responsibility and help consumers avoid bankruptcy.
In the early 1960’s, the first local consumer counseling agency opened to serve people with debt problems directly. The popularity of these agencies grew over the years to the point where there was once over 1,000 agencies available to assist the public; however, this figure has shrunk to around 300 today.
The NFCC is a trade organization and it does not provide any direct services to either their retail clients or to consumers. Creditors are free to solicit their advice, but the NFCC does not get involved in collection efforts which they bring against their clients. From 1951 until 1993, the NFCC was the only trade organization dedicated to the consumer credit industry.
The Association of Independent Consumer Credit Counseling Agencies (AICCCA) was the second trade organization to form in response to the growing problem of consumer debt. They were the first competition that the NFCC faced in 42 years and were formed amongst concerns over the lack of industry-wide standards of ethical conduct.
The major dividing point between the two organizations was that the newer AICCCA was in favor of providing debt management solutions to consumers over the telephone, while the NFCC was strongly opposed to this, favoring instead counseling sessions that were conducted in person.
In time, the NFCC came around to AICCCA’s way of thinking and formally promoted telephonic delivery of services. Today, credit counseling agencies reach consumers in person, through large call centers and the Internet. Membership in either trade organization is completely voluntary and credit agencies remain free to subscribe to their own methods of conducting business.
The credit counseling industry saw an upswing in business with the 2005 passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. In response to growing bankruptcy fraud, congress passed a measure which required all people filing bankruptcy to complete a program with a non-profit budget and debtor education center Uces Protection Plan. This course must be completed within the 180 days prior to filing for bankruptcy, and it must be followed up with a post-filing debtor education counseling session. If neither of these requirements is met, debtors may be ineligible to have their debts discharged.
The popularity of credit counseling services has grown beyond the United States into Europe, where consumers there can attain debt help through either a for-profit agency or a charity such as Christians Against Poverty. It appears to be an industry that is here to stay, both in the US and abroad.