The National Foundation for Credit Counselling was one of the first non-profit credit counselling firms . They helped cash strapped consumers negotiate a lower interest rate and payment plan from their creditors, banks etc. The banks and credit card issuers supported them by giving a portion of the check (lower of off course) they receive from the consumers. It was called the ‘fair-share’.

In the 90s when consumer debt spiralled upwards, new for profit credit counsellers entered the market. These companies, being for porfit, went after consumers who were able to pay off their debt but who just wanted to lower their interest cost. They charged higher and often hidden fees. After negotiating a lower rate for their customers, many simply took their check and never paid the credit card company or bank. As a result, many unsuspecting consumers had their credit scores destroyed.

As a result of these tactics being used, soon after, many credit card companies and banks stopped giving back the ‘fair-share’ to credit counselling firms. This hurt the truly non-profit firms that really wanted to help their customers.

This explains why choosing a good and reputable credit counselling firm is such a minefield today. You should not avoid seeking one if you need help, but you just have to do your due diligence and pick the right one. We will explore how to do so in our next post.

This entry was posted on Thursday, April 19th, 2007 at 12:20 pm and is filed under Credit Reports and Scores, Debt Reduction, Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.