What are Consolidated Credit’s Debt Management Fees?

What are your fees, if I enroll in your consolidated credit program?

Phyllis 
Secaucus, NJ

An expert answer from Consolidated Credit Education Director April Lewis-Parks

6 things you need to know about debt management fees

#1: Debt management fees are capped nationwide

The Uniform Debt Management Services Act of 2005 governs the credit counseling service industry. It works to ensure that services provided by nonprofit credit counseling agencies are consistent and equal. The goal is to ensure that consumers are treated equally and fairly, regardless of which not-for-profit credit counseling agency they choose.

Currently in 2018, debt management fees are capped at $79. That means that no matter where you live, the most you can expect to pay per month is $79. That’s true regardless of how much you owe and to how many creditors.

#2: Fees vary based on the state where you reside

State law regulates debt management fees based on where you reside, although they never exceed $79. Some states have regulations in place that make debt management programs even cheaper.

#3: You’ll only be charged what you can afford

The point of credit counseling is to help you set up a repayment plan you can afford. The goal is to find a payment that will work for your budget so you can stop charging and focus on paying off debt.

This means that fees can be lower based on the severity of your situation. If you’re facing severe financial hardship, it’s likely that you’ll pay less. Fees are also based on how much you owe, in total, as well as how many accounts you need to pay off.

On average, debt management program clients with Consolidated Credit pay around $40 per month. The monthly fee is rolled into the client’s regular debt management program payments. That helps ensure that the client can afford to repay their debt, based on the budget they set up with their credit counselor.

#4: Fees should vary little between different credit counseling agencies

Fees from one nonprofit credit counseling agency to the next differ very little in most cases. That’s true for a number of reasons:

  1. They’re capped nationally
  2. They’re state-regulated
  3. The agencies are not-for-profit, so they’re not using your fees for revenue

Basically, debt management fees cover the money the agency needs to set up your program and administer payments. As a result, the fee structure should vary only slightly from one company to the next. You’re not going to pay $5 with one agency and $500 with another.

#5: Debt management fees are low by comparison

Even if you paid the maximum fee of $79, it would still be low by comparison.

First, debt management fees are small compared to the money you save by reducing or eliminate interest charges. Data proves that the average debt management program client with Consolidated Credit sees their total credit card payments reduced by up to 30-50%. Clients save thousands of dollars with a debt management program, so a $40 average fee is low by comparison.

In addition, debt management fees are low compared to other debt relief options. Debt settlement allows you to get out of debt for a percentage of what you owe. But the fees generally range from 10-25% of the debt amount settled. So, if you settle $10,000, then the fees would range from $1,000-$2,500. Debt settlement companies can’t charge fees up front, but once they settle your debt, the fees apply. Some states regulate fees to ensure they fall between 10-15% of the debt settled. But that’s still high compared to the fees for a debt management program.

You should also consider the cost of higher interest rates you could face if you settle. Unlike debt management which pays back everything you charged, settlement gets you off the hook for less than you owe. But the effect is that you damage your credit score with each debt you settle. Settlement creates a negative remark on your credit that sticks around for seven years. This means higher interest rates on new debts, if you can get approved for new financing at all. Higher rates mean higher interest charges, leading to higher costs to borrow.

#6: Consolidated Credit waives DMP fees for high-need individuals

In certain situations, the monthly debt management fees may be waived for a period of time while you are enrolled in the program.

For example, Consolidated Credit waives monthly fees for active-duty Service Members during deployment. The Service Member can opt to reduce their monthly payment during deployment or apply the fee savings to pay off their debt faster. If you’re a Service Member enrolled in a debt management program, whether it’s with Consolidated Credit or not, call your credit counseling agency before you deploy. You can talk about DMP fees, as well as ensure that all of your negotiated interest rates fall under the 6% APR cap guaranteed under the Servicemembers Civil Relief Act (SCRA)

Consolidated Credit also typically waives fees for enrolled clients who live in an are affected by a major natural disaster. For instance, fees were waived for people in the affected areas after Hurricanes Harvey, Irma and Maria last year. The decision was made because people in affected areas of a natural disaster often have trouble making ends meet and rely on credit to get by. As such, fees are waived for people during the recovery.