What is credit counselling?
For most people, credit counselling is about finding a solution to resolve debt problems.
Good credit counselling and debt advice involves more than just selling a debt management plan. Good credit counselling services involve:
- Meeting with you in-person
- Spending time to learn about your personal financial situation
- Explaining all your debt relief options not just one
- Providing custom-tailored solutions that meet your needs
Only Licensed Insolvency Trustees provide all 4 credit counselling services. The reason?
Not-for-profit credit counselling agencies are not mandated to ensure that you understand all your debt relief options. Only Licensed Insolvency Trustees are required, by law, to explain all debt consolidation, debt repayment and debt settlement options.
Our goal is to provide you with the right solution to deal with your debts. Very few people we meet actually have to file bankruptcy. You have other options and we’ll review the pros and cons of each alternative with you and let you decide on the best course of action.
Credit Counselling Options and Solutions
Let’s explore a little more the debt solutions available when you contact a credit counsellor for debt help.
Non profit credit counselling agencies offer debt management plans. A debt management plan is a repayment plan that requires you to pay back 100% of your debts. Through a debt management plan, your credit counsellor may be able to negotiate some interest relief, but the truth is you still must be able to afford to repay all your debts, in full. A credit counselling agency can’t negotiate a debt settlement for less than you owe.
A consumer proposal is almost always the better option than a debt management plan for someone who is struggling with more than $10,000 in debts. A consumer proposal, because it allows you to settle your debts for less than the full amount, results in a payment that is much less than what a credit counselling agency can provide.
Formal debt settlement programs like a consumer proposal are not available through a credit counselling agency. Credit counsellors can only provide debt management plans.
Learn more important facts you should know about a debt management plan or contact us today to talk about your options in a free, no-obligation consultation.
Not-for-profit Credit Counselling Has Changed How They Provide Debt Help
Credit counselling in Canada has changed. Credit counsellors used to be members of local, not-for-profit credit counselling agencies. They were team members in community-based family and counselling organizations. They were able to spend time with clients, helping them build a budget and, if necessary, turn to a debt management plan as a solution to dealing with their debt. They could also provide additional support services like employment planning, family counselling and more.
Recent legislative changes have made it difficult for local agencies to survive. Today, credit counsellors are more likely to be members of three large Canadian non-profit organizations. Their main product is a debt management plan.
Not-for-profit credit counselling agencies, in order to provide debt management programs, must be registered as debt collectors under the Collection and Debt Settlement Services Act. This makes sense when you think about the fact that a debt management plan is really a program to collect the full amount of debt owing to creditors.
It’s hard to believe, but it’s true. Credit counsellors are actually collection agents. Don’t believe it? In Ontario, you can go to the government of Ontario’s website and type in the name of a credit counsellor to see if they are registered as a collection agent in Ontario. Search Debt Collectors – select collection agency under license type then enter the name of the agency.
Credit counsellors get paid in two ways. They keep a portion of your monthly payments, usually around 10%. In addition, credit counselling agencies receive funding from banks, credit unions and other financial institutions. They are in fact reliant on banks to provide a substantial portion of their operating funds. Credit counselling companies receive little in the way of charitable donations outside of moneys they are paid by financial institutions and some have even lost their status as registered charities. The banks are willing to provide these funds because they recover more in a debt management plan than they would through an alternative like a consumer proposal.
But I thought all not for profit credit counsellors are registered charities? Some are, some are not. To find out if the credit counsellor you are dealing with is a registered charity, you can do a search on Canada Revenue Agencies website listing all registered charities: Search Charities – enter the charity name, and for Charity Status select All.
Accredited Credit Counsellors & Counselling Agencies in Canada
Credit counselling agencies like to say that they are large non-profit organizations whose members are accredited and registered counsellors of a national or provincial credit counselling association or society.
These accreditation programs, however, are self-regulated. They are associations of fellow credit counsellors who have created their own Financial Counsellor Program. While it is good to ensure that there are consistent standards and practices among credit counsellors, it is still important to understand that not-for-profit agencies are not subject to any government or outside oversight. In contrast, Licensed Insolvency Trustees are both licensed and regulated by the federal government.
Where to Find Credit Counselling Services
If you have less than $10,000 in debt, or can afford to repay your debts in full, then not-for-profit credit counselling can provide the debt help that you need to structure your debt payments so that you can pay off your debt.
If you cannot afford to repay your debts in full, then getting credit counselling and debt help through a Licensed Insolvency Trustee is a better way to ensure you explore all your options.
Contact us today and let us help you find the best way out of debt.
Hoyes Michalos & Associates provides credit counselling services in the following locations