Consumer Credit Counseling Service Definition

Written by Bill MacDonaldMarch 27th, 20234 minute read

Consumer Credit Counseling Service Definition

According to the Urban Institute, approximately 77 million Americans, or as many as 35 percent of adults with a credit report, have a debt in collections. These adults are obligated to pay an average of $5,178 (median $1,349).

Debt in collections means a non-mortgage bill, like a credit card balance, utility, or a medical bill that's greater than 180 days overdue and has been sent to a collection agency. 5.3 percent of people with a credit report has a past-due debt, that is between 30 and 180 days late on a non-mortgage payment.

The debts in collections and debts past due are largely concentrated in the South. Source: Delinquent Debt in America

What causes bad debt?

According to Bankrate, the 10 reasons for bad debt are:

  1. Reduced income/same expenses
  2. Divorce
  3. Poor money management
  4. Underemployment
  5. Gambling
  6. Medical expenses
  7. Saving too little or not at all
  8. No money-communication skills
  9. Banking on a windfall
  10. Financial illiteracy

Regardless of the reason for your bad credit, restoring your credit profile is important, because your credit report is used for credit cards, mortgages, installment loans, and other lending decisions, but can also be used by employers (with your permission), collection agencies when they need it to collect a delinquent debt and insurance companies. Your car insurance can actually be higher with a low credit score even with a perfect driving history!

The Fair Credit Reporting Act (FCRA) defines who is permitted to see your credit report. Companies are required to have a "permissible purpose," as defined in the FCRA, to obtain a copy of your credit report. Bad debt, whether deserved or not, means higher interest rates, insurance cost, and possibly a better job; and usually results in poor health.

What does the Consumer Credit Counseling Service offer?

One of the simplest ways to repair your credit is to partner with Consumer Credit Counseling Service. CCCS is the most popular credit counseling agency. CCCS is a nonprofit corporation that is financed by creditors. CCCS can assist you to set up a repayment plan to manage all of your debt.

There are numerous consumer credit counseling services to help you fight your bad credit. You need to locate one in your area. You can check with the state attorney general's office or your local Better Business Bureau to ensure the agency you choose has no complaints against it. CCCS negotiates on your behalf with the creditors to reduce the interest rates on your bills or lower the payments.

Your monthly debt is consolidated into one monthly payment that is less than the total monthly indebtedness. The company also provides consumers with credit and financial education to help prevent future credit issues. You may have to pay a small monthly fee to CCCS for their service.

CCCS may not be able to reduce your total overall debt, and you must pay all your outstanding debt in full. If you miss payments, collections actions might be pursued by your creditors.

Your credit report will state that you used credit counseling services, and a few lenders could be reluctant to lend to you as a result of this, since it is a clear indication you are having problems managing your payments. You should also know that by using this service, there could be a freeze on your credit accounts. You will have the ability to make payments toward them but not use them.

You have to be cautious when choosing a credit counseling agency. Even though CCCS is well known, there are many others. Some charge a setup fee and a monthly fee for their services, which consist primarily of consolidating a consumer's debt into one payment.

Make sure you choose a counseling agency that:

  • Will provide you with a written statement of their services and will provide you free information
  • Will disclose all fees (if any)
  • Guarantees to make all agreed payments to creditors on time
  • Provides consumer education in addition to just working out how you will make payments.

Frequently Asked Questions About Consumer Credit Counseling Service

Q. Can consumer credit counseling stop a wage garnishment?
A. Possibly. According to, a consumer credit counseling service (CCCS) may be able to help you stop a garnishment. Not to be confused with debt repair companies, a CCCS is a non-profit agency that can help you negotiate and reach an agreement with your creditors to pay them overtime. If your creditors agree to participate in this group-payment plan, then they cannot garnish you as long as you make your payments.

Q. Does Consumer Credit Counseling hurt your credit?
A. Initially, debt management plans offered by Consumer Credit Counseling may impact the customer's credit.

Q. How does consumer credit counseling work?
A. The credit counselor will contact your creditors and attempt to remove fees, lower the interest rates on your credit cards and debt obligations, and generate a monthly payment plan you can work with. All of your debt obligations will be combined into one monthly payment that will be made to the counseling agency and they will then pay each of your creditors.

Q. Is Consumer Credit Counseling a good idea?
A. Consumer Credit Counseling can make it easier to pay off your debts by combining all or most of your bills into one monthly payment.