I see all sorts of information on your site that explains how fees for your program are set, but I’m still confused. If credit counseling agencies are nonprofit, why do I have to pay fees at all? Shouldn’t it be free?
Daniel J. in Dallas, TX
Here’s Why You Have to Pay Fees Even for Nonprofit Credit Counseling.
Why do I Have to Pay a Fee to Join a Debt Management Program?
Since debt management programs are administered by nonprofit credit counseling agencies, people often wonder why the service isn’t completely free. Consolidated Credit’s president Gary Herman explains why the fees exist, what they cover and how the bulk of the services that a credit counseling agency provides are covered by creditors, rather than the consumers who enroll in these programs.
[On-screen text] Ask the Expert – Why Do I have to Pay a Fee to Join a Debt Management Program?
Gary Herman, President of Consolidated Credit: Virtually every nonprofit credit counseling agency charges fees to its clients for the services it provides. These fees simply cover our costs associated with providing the services. There’s no profit or extra dividends or money built into the fees that we charge. And a good portion of what we do is paid for by your creditors.
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Nonprofit credit counseling agencies, like any nonprofit, need funding to cover the costs of the programs that they provide. This is what your debt management program fees cover. Your fees cover the costs of overseeing and administering your debt management program.
The difference with for-profit credit counseling agencies
Agencies that offer credit counseling for a profit use their fees for just that: making a profit. While some of the fees clients pay go back into operations, the real function of the for-profit agency is to make money.
In addition, unlike nonprofit agencies that present all debt relief options you have equally, a for-profit credit counseling agency may drive you into a debt management program.
Nonprofit credit counseling agencies and grants
Other funding for credit counseling agencies comes from creditors themselves. Nonprofits receive grants from large credit card companies. But why? Well, it’s better for credit card issuers and consumers to use debt management programs to pay off everything they owe. The idea is that counseling agencies help credit card customers rehabilitate their credit, so they can regain stability. This helps those customers avoid solutions like debt settlement and bankruptcy, where a credit card company would lose money through a full or partial discharge of a debt. It’s good for the credit user and good for the creditor.
Grants from creditors also help nonprofit credit counseling agencies provide free financial education resources. This is a large part of Consolidated Credit’s mission. Helping people get out of debt is only beneficial if they can stay out of debt.
For over 26 years, Consolidated Credit has advocated for consumers and promoted financial literacy. We host financial education programs, present webinars, write ebooks, and more. We also partner with other organizations, such as United Way and Girl Scouts, in community outreach initiatives to spread our message about the importance of financial literacy even further.
Ready to talk about finding debt relief? Call a certified credit counselor today.
