Nonprofit Credit Counseling Explained
Most reputable credit counseling agencies operate as nonprofits — but that status carries a specific legal meaning that's often misunderstood.
"Nonprofit" Doesn't Mean Free
A common misconception: nonprofit tax-exempt status describes the agency's organizational structure, not a promise of free services. Nonprofit agencies can and generally do charge fees, particularly for debt management plan administration.
Accreditation Markers to Look For
Affiliation with the National Foundation for Credit Counseling (NFCC) is one commonly cited accreditation marker worth checking for when evaluating an agency.
How Nonprofit Agencies Are Typically Funded
Nonprofit credit counseling agencies are commonly funded through a combination of client fees and contributions from creditors (sometimes called "fair share" payments), who benefit when a DMP results in more consistent repayment than a defaulted account would otherwise.