Our analysis indicates that in many cases, consumers can achieve the same results as consumer credit counselors or debt managers, on their own. The terms offered by credit card banks directly to consumers are about the same as the terms offered to non-profit credit counselors. The major difference being that when the consumer acts as their own credit counselor, the consumer retains control of all the individual monthly payments which represents advantages and disadvantages.
In essence, the consumer credit counselor or debt manager enrolls the consumer credit card accounts into hardship programs offered by the credit card issuing bank. The hardship program typically entails a reduction of credit card interest a waiving of any accrued fees and penalties and, sometimes, a reduction in the amount of the monthly payment due on the credit card account. The consumer makes monthly payments to the consumer credit counselor or debt manager instead of the credit card bank. The credit counselor or debt manager in turn disburses the payment to the credit card banks under the terms of the hardship program, after assessing a nominal handling charge.
The key is that the credit card bank, not the credit counselor, offers the hardship programs. The credit counselor has very little to do with the terms of the credit card bank's hardship program. We found most banks permit consumers to enroll themselves in the exact same program provided the proper forms were provided and the request was made to the appropriate department. There are certain banks rumored to require the consumer to use a consumer credit counselor but we did not encounter that obstacle.
The knowledgeable consumer could theoretically avoid the charge levied by the consumer credit counselor or debt manager and the bank would avoid the fair share payment (compulsory donation) to the non-profit credit counselor or debt manager.
What would be missing is the consolidation of the payment. The consumer would retain control over the monthly payments to the credit card issuing banks and would be left with all the individual monthly payments they started with. With consumer credit counseling or debt management, the consumer has only one monthly payment each month to the credit counselor or debt manager.
This issue of the payment could be a benefit rather than inconvenience. We found that payments being made late by credit counselors and debt managers to be a common occurrence. The consumer would avoid the danger of the consumer credit counselor or debt manager failing to make timely payments and the consumer being assessed a late charge, or derogatory credit reporting. The consumer could also use bill pay services offered by major banks to, in essence, consolidate the payment.
