National Foundation for Credit Counseling (NFCC)

What Is the National Foundation for Credit Counseling (NFCC)?

The National Foundation for Credit Counseling (NFCC) is a national network of non-profit credit counseling organizations. One of the primary services provided by NFCC member agencies is counseling people who have taken on too much debt, with the goal of keeping them from declaring bankruptcy.

To achieve this objective, NFCC members often recommend that their clients participate in a debt management plan (DMP), in which the client makes a single monthly payment to the NFCC member, who in turn uses those funds to repay the client’s debts.

A central assumption of the DMP strategy is that the NFCC member will successfully negotiate more flexible debt repayment terms with the client’s creditors, which may or may not be true in practice.

Regrettably, some unethical credit counseling firms have been known to make unrealistic or misleading promises to their clients, placing them in an even worse financial position. Accordingly, the NFCC works to maintain standards of ethical conduct within the credit counseling industry.

Understanding the NFCC

Founded in 1951, the NFCC has grown to represent member agencies in all 50 states, including the District of Columbia and Puerto Rico. The NFCC acts as a coordinating body for its member firms, while also lobbying the United States government on behalf of the credit counseling industry.

When dealing with its member firms, the NFCC’s primary responsibilities consist of accrediting individual firms and providing training and other resources to new debt counselors.

In order to maintain their NFCC accreditation, member firms must ensure that their staff is adequately trained and that annual audits are completed in regard to their operating and trust accounts. NFCC member firms must also provide ongoing consumer education programs while demonstrating that any funds held on behalf of clients are being regularly disbursed to those clients’ creditors on a biweekly basis.

In recent years, some consumer watchdog organizations have criticized the credit counseling industry for its alleged exploitation of some vulnerable customers. In addition to explicitly fraudulent organizations that accept clients’ money and do not pass it along to their creditors, some ostensibly legitimate credit counseling agencies do not make it clear that their services are often not free for the end-user.

Real-World Example of the NFCC

Emma is struggling to repay her debts and is seeking the help of a credit counselor. She learns through the website of an NFCC-accredited credit counseling company that the firm is a non-profit that provides services such as credit score reviews, advice on how to avoid foreclosures, information on how to responsibly use products such as a reverse mortgage, guidance on student loan repayment plans, and assistance through DMPs.

Through her work with the company, she is able to pay off her debts, one manageable monthly payment at a time.