Credit Counseling - History of Credit Counseling

History of Credit Counseling

At one time, there were over 1000 active credit counseling agencies. Today, there are fewer than 300 active organizations in the United States. The first credit counseling agencies were created in 1951 in the United States when credit grantors created The National Foundation for Credit Counseling, or NFCC. According to W. Patrick Boisclair, Chairman of the NFCC's Board of Trustees, "the NFCC initially monitored legislative and regulatory activity for its retail credit members" and "also conducted public awareness campaigns on credit."(source) Their stated objective was to promote financial literacy and help consumers avoid bankruptcy, but they did not serve as collection agencies for the creditors. The first local credit counseling franchises emerged in the 1960s and offered education and counseling directly to consumers.

In 1993, the “Association of Independent Consumer Credit Counseling Agencies,” or AICCCA, was founded, citing a need for “industry-wide standards of excellence and ethical conduct.” This formally organized the NFCC’s competition. The AICCCA was formed from the group of counselors who favored telephone delivery of debt management programs. The NFCC was, in the beginning, strongly opposed to this telephone business model, primarily favoring face-to-face counseling as a more effective solution. Eventually, all organizations practiced both phone and face-to-face processes with some agencies using large inbound call centers driven by mass media advertising.

In May 2010, the "Association of Credit Counseling Professionals," or ACCPros, held its inaugural conference as a trade organization. ACCPros is the only major credit counseling trade group that accepts for-profit agencies as members. Though not the only trade association with legislative activities, ACCPros focuses on advocating for reasonable and practical regulations and laws protecting consumers and governing the credit counseling industry.

Many credit counseling agencies belong to more than one trade organization. However, not all credit counseling agencies belong to a trade organization, nor are they required to do so.

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made credit counseling a requirement for consumer debtors filing for Bankruptcy in the United States. In order to meet this requirement, during the 180-day period preceding the filing of bankruptcy, the debtor must complete a program with an approved nonprofit budget and credit counseling agency. Such a program may include, but is not limited to, one counseling session conducted by phone or over the internet. In addition, a post-filing debtor education credit counseling session is required in order to complete the bankruptcy process and to have your debts discharged.

Credit Counseling is also a growing industry in Europe, both for profit-making debt management companies and charities such as Christians Against Poverty and the Consumer Credit Counselling Service, Britain's largest debt advice charity.