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Debt Relief Options: CCCS History

Debt Relief Options: CCCS History

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Kunal Punjabi
UpdatedJul 15, 2024
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    4 min read
Key Takeaways:
  • Lenders allow lower interest rates and payments to borrowers signed up for Consumer Credit Counseling (CCCS) Debt Management Plans
  • Most credit counseling plans assume the entire debt will be paid plus interest charges, and do not negotiate to reduce principal balances

The History of Consumer Credit Counseling Services

Credit Counseling is a debt management solution devised by leading credit card issuing banks in the 1960s as a means of reducing default rates among consumers struggling to meet their monthly credit card payments. Consumers who enroll into a CCCS Debt Management Plan (DMP) are usually granted a reduction on their interest rates, called a “concession rate,” which is set by the individual banks. These rates are not negotiated on an individual basis, but are typically part of pre-arranged agreements between CCCS firms and lenders. Most credit counseling plans assume that the entire debt will be paid, and do not negotiate with creditors to reduce customers’ principal balances — but do lower interest and fee charges.

While it may seem strange that the credit card lenders would implement a program that allows consumers to pay less interest and, in some cases, reduce their monthly payments, CCCS firms also help the banks’ bottom lines by allowing some financially stressed customers to continue making payments on a regular basis. In return, the consumer finance industry has traditionally provided financial support to credit counseling agencies through a system of payments called “fair share,” in which lenders pay back to credit counseling agencies a percentage of the money the creditors receive from the agencies each month. Historically, the typical “fair share” percentage was around 15%, meaning that credit counselors received 15% of all money they paid to creditors on behalf of their customers.

In recent years, however, many banks reduced their fair share payments to around 6% to 8%, and some have stopped them altogether.1 Many experts see the counselors’ reliance on “fair share” as a serious conflict of interest between the credit counselors’ obligations to their consumer clients and their need to please credit card lenders, which provide many agencies’ revenue. Although the use of “fair share” is common among credit counseling agencies, its continued use has led to sharp criticisms of the credit counseling industry.

In addition to the money they receive through “fair share,” credit counseling organizations collect monthly fees directly from their customers, typically charging $10 to $15 per month for each debt enrolled in a DMP. While these charges may seem insignificant, one must consider that the fees are charged every month for the duration of a consumer’s credit counseling plan. For example, a consumer with 10 enrolled debts and a monthly DMP fee of $10 per account, would pay a total of $6,000 in fees over the life of the typical five-year DMP.

Although the fees and “fair share” payments provide a significant revenue stream for many credit counselors, many agencies operate as tax-exempt, non-profit “community service” organizations. While some credit counseling agencies are charitable non-profit organizations, a 2006 investigation conducted by the Internal Revenue Service found that many credit counselors claimed IRS tax-exempt status while bringing in large profits, using various means to disguise those profits, and providing executives with excessive compensation when compared with the pay at other, comparably sized, non-profit organizations. As a result of its investigation, the IRS revoked many credit counselors’ tax-exempt non-profit status, including many of the country’s largest credit counseling providers.2 These actions by the IRS have benefited consumers and the credit counseling industry, allowing more traditional CCCS programs to prosper, while forcing less scrupulous providers, such as AmeriDebt and other “DMP mills,” out of business entirely. The industry is now split between for-profit CCCS firms which derive the bulk of their revenue from monthly client fees and the traditional CCCS non-profit firms.

Once enrolled in a CCCS program, the agency will establish a Debt Management Plan, or DMP, under which the consumer makes a single monthly payment to the counseling agency; the agency keeps a portion of each payment for its fees, then distributes the customer’s payment amongst the individual creditors. A typical DMP aims to repay the entire debt, along with accrued interest, over the course of five years.

Back: Debt Relief Background Next: CCCS Pros

1.Sources: Credit Counseling in Crisis: The Impact on Consumers of Funding Cuts, Higher Fees and Aggressive New Market Entrants, Consumer Federation of America and National Consumer Law Center (April 2003).; Losing Credibility: Troubling Trends in the Consumer Credit Counseling Industry in Massachusetts. Senate Committee on Post Audit and Oversight. Massachusetts State Senate (April 2002).
2.Credit Counseling Compliance Project. Internal Revenue Service (May 2006).

Get rid of your debt faster with debt relief

Get rid of your debt faster with debt relief

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Get started now

Or speak to a debt consultant  844-731-0836

Struggling with debt?

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Each state has its rate of delinquency and share of debts in collections. For example, in Wyoming credit card delinquency rate was 3%, and the median credit card debt was $520.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.



GGina, Feb, 2020

I am over 60 with 60K in credit card/parent loan debt. I can barely make the minimum payments each month. I am looking to consolidate my debt with a lower interest rate but don't want to pay enormous extra fees. What is the best solution?

DDaniel Cohen, Feb, 2020

Gina, what is the cause of you accumulating $60,000 in debt? I understand that part of that is financing a child's education, but not sure how much. Which creditors you owe, the amount owed to each and the interest rates are important to understanding your options. 

Also, you really have two goals, you stated one explicitly and one is implied. Your explicit goal is a lower interest rate without fees. Your unstated goal is that you need monthly payment relief because you are barely making your minimum monthly required payments. That means that you would not benefit from a consolidation loan at a lower interest rate if it increased the size of the monthly payment. Minimum payments on a credit card are smaller than than on a personal loan, because the personal loan pays interest and principal each month and pays off the loan in a fixed period, usually within 5 years.

Even if you have a credit score that will get you the best personal loan rates on the market, your payment will increase with a personal loan.

I suggest you use our free Debt Payoff Calculator. If you have any questions after you go through the Debt Payoff Calculator, you can call me at 800-998-7497.