It is a strange fact perhaps that credit counseling though commonly viewed as a service to help the borrower was in fact established by a group of creditors.  The first credit counseling agencies was set up in 1951 in the United States and went by the name of National Foundation for Credit Counseling.  According to the chairman of the National Foundation for Credit Counseling’s board of trustees the NFCC was established initially to monitor the legislative and regulatory activities for its retail credit members and also conducted public awareness campaigns on credit.  There intent was to promote financial literacy and to help the customers avoid bankruptcy.  They also did not serve as collection agencies for the creditors.  It was not until the 1960s that local credit counseling franchisees appeared and started offering credit counseling services directly to the consumer.

The National foundation for credit counseling received its formal competition in 1993 with the founding of the Association of Independent consumer credit counseling agency.  The AICC was formed by a group of councilors who favored telephone delivery of debt management plans.  The NFCC was in the beginning opposed to the telephone business model primarily favoring to deliver counseling on one to one basis believing that it was a more effective manner of providing assistance assistance to the consumer.  In the current day and age all credit counseling organizations practice counseling over phone, in person and over the Internet.

The third credit counseling industries trade organization goes by the name of American Association of debt management organization or AADMO.  This is perhaps the credit counseling industry’s largest trade organization.  All credit counseling agencies are not required to belong to a particular trade organization and not all of them do.  Currently there are well over 1000 active credit counseling organizations in the United States of America.

A change in the legislation that gave credit counseling extra importance was the bankruptcy abuse prevention and consumer protection act of 2005.  According to this act it became mandatory for any person intending to file a bankruptcy to go through a pre bankruptcy counseling.  In order to fulfill this requirement the debtor was supposed to complete a programme with an approved non-profit budget and credit counseling agency during the 180 day period preceding the filing of the bankruptcy.  It has become common in current times for a pre-bankruptcy counseling session to happen over the phone or over the Internet.  In addition a post-filing debtor education credit counseling session is required in order to complete the bankruptcy process and to have your debts discharged.

Credit counseling is now a growing industry in other parts of the world specially the Europe both for profit-making debt management companies and charities such as Christians against poverty and the consumer credit counseling service, which is Britain’s largest debt advice charity.