Almost two years ago, the Payment Cards Center hosted a workshop at which several regional consumer credit counseling services (CCCS) discussed the changes in the credit counseling and debt management industry. Historically, not-for-profit CCCS organizations have taken a holistic approach to helping consumers. They use face-to-face budget counseling and debt management programs (DMPs) to help people regain control of their finances.
The budget counseling is typically offered for free, and CCCS's debt management programs require a nominal fee from the consumer and a "fair share" contribution from the consumer's creditors. For decades, the economics of the CCCS business model resulted in the agencies' having very little competition. Since the mid-1990s, however, hundreds of organizations that advertise debt management services have entered the market.
According to consumer interest groups, credit card issuers, and various states' attorneys general, some of these newer organizations are more interested in profits than in providing debt-laden consumers with sound advice. The less reputable of these new market entrants, often referred to as "debt mills," charge higher levels of fees, do not offer meaningful budget counseling, have difficult-to-understand fee structures, and are often seen as abusing their non-profit status.
The workshop the Center hosted in 2001 examined these issues from the perspective of CCCS agencies and their national parent organization, the National Foundation for Credit Counseling (NFCC). On Friday, May 23, 2003, the Payment Cards Center hosted another workshop at which representatives from J.P. Morgan Chase and Juniper Bank discussed credit card issuers' perspectives on the consumer credit counseling industry. After describing the ways in which they perceived the industry changing, the issuers discussed the difficulties associated with administering and appropriately valuing the services of various agencies. This paper provides some highlights from the workshop discussions.
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Consumer Credit Counseling: Credit Card Issuers Perspectives
