Nonprofit Credit Counselors Put Consumers First Through a Holistic Approach to Paying Off Debt

In a Nutshell: Consumers pass the point of no return financially when creditors charge off one or more of their accounts. Reaching out for help can be life-changing, but only if you choose wisely among many possible solutions. The team at the Financial Counseling Association of America (FCAA) cautions that if a debt settlement proposal sounds too good to be true, it probably is. Consumers who work with an FCAA-member nonprofit credit counselor gain a partner pledged to negotiate in their best interests to help them achieve a lasting financial recovery.

Sooner or later, people who get in over their heads with debt face a tough choice. They must either acknowledge they have a problem and seek help or relegate themselves to a kind of outsider’s status in the economy.

Because it’s game over once you demonstrate to bankers that they can’t trust you with credit. You’re on the sidelines until you repair your finances and return your credit score to a healthy range.

If we had only one piece of advice to give to consumers weighing their options to recover from a looming financial catastrophe, it would be that not everyone offering to fix your problem has your best interests at heart.

For example, some consumers with cash on hand to settle quickly will gravitate toward services that offer to settle their debts for less than what they owe. But most people don’t have money to repay their creditors. For them, choosing a debt settlement service can result in high fees, harm to their credit score, and even potential tax issues and legal action from creditors.

In contrast to for-profit debt settlement services, nonprofit credit counselors don’t have a financial interest distinct from those they serve. The Financial Counseling Association of America (FCAA) represents nonprofit financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.

Working with an FCAA member means working with a counselor dedicated to rigorous industry standards, consumer protections, compliance oversight, and advocacy before state and federal legislators and regulators. Building a debt management plan through an FCAA member helps more consumers overcome bad credit and remain part of the financial mainstream.

“A nonprofit agency will always say on its website that it has 501(c)(3) status,” said Lori Pollack, FCAA’s Executive Director. “A nonprofit will do everything it can to help you, even if it means sending you to another agency.”

Leaving aside that the best remedy for a financial crisis is never getting into one, transitioning from potential account charge-offs and collections agents to a confident financial future is a unique journey for everyone.

FCAA members give you your best bet to achieve an outcome that allows you to retain your financial autonomy.

Leading FCAA’s Board of Directors is Martin Lynch, Compliance Manager and Director of Education at Cambridge Credit Counseling. As President of FCAA, Lynch is the association’s current strategic manager, working closely with Pollack and the FCAA administrative team.

Lynch and Pollack agree that the first step can be the hardest. Stresses run high when people finally admit to themselves that they need help and begin reaching out for it.

“I still train counselors for my agency and listen to calls — and they can be emotional,” Lynch said. “For a lot of folks, it’s the first time they’ve talked with anybody — including their spouse — about their situation. Sometimes, we need to let them unwind and put it all out there.”

Then, the work begins. You will consult with an FCAA-member counselor to determine your current status and goals and create a debt management plan. Distinct from debt settlement, debt management through a nonprofit credit counselor involves direct negotiation between the client and the creditor. Lynch said most consumers don’t realize how willing lenders are to work with them.

Counselors have the skills because they must be certified, and the states where they are licensed must approve the certification programs. FCAA knows which programs the agencies are using. Those programs call for continuing education, and some states also require continuing education for counselors.

So, although it may be true that every financial journey is unique, the industry expertise of FCAA-member counselors means clients don’t often surprise them.

“You can’t replicate what our agencies do anywhere else,” Pollack said. “It’s all about gaining the best outcome for the consumer.”

The FCAA took shape in 1993 as the Association of Independent Consumer Credit Counseling Agencies before changing its name during a merger process in 2006. FCAA’s nonprofit members are accredited through either the International Organization for Standardization (ISO) or the Council on Accreditation (COA). The same holds true for members of the National Foundation for Credit Counseling.

The IRS is the main federal regulatory body for FCAA members. Pollack and Lynch said most oversight happens at the state level. FCAA diligently manages the morass of overlapping, sometimes contradictory, jurisdictions to help members grow and become national powerhouses.

“We do an excellent job for our members, keeping them up on changes and working to effect change in state legislation,” Pollack said. “We also do articles like this one to highlight that while FCAA is the umbrella, our agencies and counselors are the ones doing all the hard work.”

That sense of family between the association and its members also pervades member relations. Many nonprofit credit counseling agencies are organizations with a very long history. A spirit of sharing and support assures all benefit from industry innovation and mutual affiliation.

The push for members to achieve a nationwide reach is vital because creditors prefer to recommend national nonprofits to their credit-challenged clients simply for convenience. FCAA and its members help each other understand differences in state regulatory environments and overcome challenges in the quest to achieve national status for all.

“We help each other stay abreast of what it takes to expand,” Pollack said.

Meanwhile, Pollack and Lynch combat the perception that members work for creditors by underscoring that the IRS requires nonprofit credit counseling agencies to earn at least 51% of their revenue through consumer fees. Consumers can trust FCAA members to work in their best interest because consumers are the chief source of their success.

“It’s consumer-oriented nonprofit organizations that are on the front lines, and that’s the way it should be,” Lynch said.

Amid many inconsistencies in regulation, all FCAA members focus on protecting consumers by making sure they aren’t overpaying for services.

“We work with financially challenged and vulnerable individuals, so we protect them first,” Lynch said.

At the same time, member agencies struggle with finances, as many nonprofits do. While more than a few for-profit debt-settlement firms have the resources to invest in national advertising, debt management through a nonprofit is a message harder to get out.

Some argue that even nonprofit credit counseling is too expensive and that consumers are better off going it alone. Pollack and Lynch argue strongly against that idea. While large creditors like banks have departments that can negotiate debt management plans, they’re not interested in expanding their view beyond what affects them personally.

A counselor with a nonprofit, on the other hand, can look holistically at the client’s entire life — well beyond the financial toward the personal — to clear a viable path forward.

“We’ll look at all your accounts and any other sources of distress that are causing havoc with your budget,” Lynch said. “The creditors don’t have time for that.”

That includes housing — which is crucial in this time of crisis in the housing industry. Many FCAA agencies are federally approved to deal with housing issues when those are a contributing factor. Some do student loan work. Connecting with an FCAA agency gets you a great resource with experience dealing with many of the sources of financial crisis.

FCAA-member counselors also help clients appreciate the little things in life and find reasons to save beyond just avoiding disaster. While some may avoid contacting an agency for fear of being judged, FCAA is nonjudgmental to the core.

Negotiating directly with creditors preserves self-esteem, lowers interest rates, and allows consumers to emerge from the crisis with an intact credit score and the confidence to pursue their dreams.

Pollack remembers one client with four children who called in desperation because he realized a debt settlement plan he had signed up for threatened his home. She put him in touch with a counselor who reviewed his budget and realized bankruptcy was the best option, allowing him to keep his property. Through the budget process, the counselor learned the consumer also had an outstanding student loan and was able to help with restructuring those payments.

“He was incredibly grateful,” Pollack said. “Debt settlement will never do something like that.”