Credit counselling agencies provide a range of services for people in financial difficulty. One of the most common services they offer is help with finding the best strategy to pay off your debt through a debt management program.
Credit counselling agencies can also offer you one-on-one counselling, group courses and seminars on topics such as:
You may have to pay fees to a credit counselling agency for their services. The amount of these fees varies from agency to agency. Before you use their services, do some research to make sure you know what costs are involved and what services you will receive.
Provincial and territorial governments are responsible for regulating credit counselling agencies and investigating consumer complaints.
A debt management program is designed to help you pay off your debt. Once you are enrolled in such a program, a credit counsellor will contact the companies to which you owe money (called your creditors), and ask for their cooperation. Creditors usually agree to cooperate in putting your debt management plan to work. In some cases, your creditors may agree to reduce or eliminate the interest rate and/or fees on your debts.
To sign up for a debt management program, you will usually have to sign a contract with the agency. The contract will say that you will make regular payments to the agency. The agency will use those payments to pay off your creditors according to the plan.
It is important to understand that not all types of debt are covered by this type of program. For example, secured debts (those guaranteed with an asset, like a car loan or a mortgage), are generally not covered because the asset that secures the loan can be repossessed by the creditor if you don't make the required payments. Make sure that any credit counsellor explains exactly which of your debts the program will cover.
Entering into a debt management program is completely voluntary. You should not feel pressured to participate without considering all of the implications.
A credit report is a snapshot of your credit history. It lists your debts with your creditors. Your creditors send this information on a regular basis to credit reporting agencies to show whether or not you are making your payments on time.
While you are on a debt management program, there will be a note on your credit report to show that you are making regular payments to creditors through a special arrangement with your credit counsellor. During this time, you will usually not have access to more credit.
After you have completed your debt management program, you will be able to access credit again. However, for the next two or three years, your credit report will indicate that you used the services of a credit counselling agency to help repay your debts. During this period, if you give creditors, landlords or employers permission to access and view your credit report, they will also see this information.
For more information on credit reports and credit history, see FCAC's publication Understanding your Credit Report and Credit Score.
Before you seek the services of a credit counsellor:
If you've considered your options and you think you could benefit from the services of a credit counselling agency, do your research to find a reputable organization and a qualified counsellor. Here are some helpful ways to help you find a reputable credit counselling agency and counsellor:
The services that credit counselling agencies offer can vary greatly and so can the costs. Here are some questions you can ask to help you find an agency that is right for you.
If the credit counselling agency seems to meet your needs, ask to meet with a credit counsellor so you can see if there is a good fit. Any reputable credit counselling agency will not charge for this.
Here are some other key things to think about if you are considering getting help from a credit counselling agency:
Make sure you are comfortable with the counsellor and that you trust his or her opinion and judgement. If you are not comfortable with the person assigned to you, ask if there is another counsellor that can help you with your situation.
Your creditors may help you reduce your debt by giving you a lower interest rate — which will save you money. But the agency may charge you for its services. Compare the agency's fees with what you would save in interest if you were on the debt management plan. If the agency's fees are more than what you can save, you could be better off seeking help from other sources.
Provincial governments, not-for-profit organizations and for-profit companies all offer credit counselling services. For a list of some of the services available across Canada, visit the these websites: