12 FAQs About Non-Profit Credit Counselling

1. What is non-profit credit counselling?

Non-profit credit counselling (NPCC) is a service available to anyone in Canada. NPCC agencies offer free financial counselling, access to low-cost debt solutions, and financial education to anyone who reaches out for help.

2. What happens in a credit counselling session?

A consumer will meet with an Accredited Financial Counsellor to review their situation including income, assets, liabilities, monthly expenses, and debts. The counsellor will review all options available to the consumer to address their situation. The consumer and counsellor will co-create a manageable spending plan (budget) along with an action plan for next steps. Referrals to outside services are provided when appropriate, at no cost. Sessions can be in-person, virtual, or by telephone.

3. How are agencies funded?

Members of Credit Counselling Canada are non-profit organizations funded primarily by creditor donations and small fees-for-service that are waivable. Some agencies have received grants and sponsorship. Agencies are not funded by the government.

4. What is the Debt Management Program/Orderly Payment of Debt

The Debt Management Program (DMP) or Debt Consolidation Program (DCP) is a voluntary debt repayment plan whereby a consumer’s unsecured debts are pooled into one monthly payment. Many creditors eliminate the interest (or reduce it considerably) to ensure the consumer can become debt free in a reasonable amount of time. Agencies disburse funds monthly to creditors on a prorated basis on behalf of the consumer. 

The Orderly Payment of Debt is a court-ordered consumer repayment program offered only in Alberta, whereby unsecured debts are consolidated into one monthly payment, with an interest rate of 5% paid to creditors and a fairshare charged to creditors before distribution at 15%. 

Both the Debt Management Program and Orderly Payment of Debt are options before insolvency (Consumer Proposal or Bankruptcy).

5. Does credit counselling impact a consumer’s credit rating?

Any consumer can meet with a credit counsellor at no charge and with no impact to their credit rating. If they establish a Debt Management Plan, it will result in a ‘7’ rating for 2 years after successful completion. There is no public record. 

6. How does NPCC work with creditors, including collection and/or debt-buying agencies?

When a consumer establishes a Debt Management Program, the agency sends their creditors a proposal for prorated payments, including a request to eliminate or reduce the interest charged. Creditors will review and respond to the proposals in accordance with their policies. After the proposals are accepted, the agency will distribute funds to the creditors on a (minimum) monthly basis. 

Communication between creditors and agencies occurs regularly to support consumers in becoming debt-free. 

7. Does it cost my company money to work with NPCC?

Any customer can work with NPCC at no cost. It only costs when a consumer establishes a Debt Management Program. When funds are disbursed back to your company, we ask for a donation (% of deposit) to maintain the free financial counselling and education Canadians receive from the non-profit credit counselling industry. These donations allow agencies to serve your customers as well as other Canadians at no cost.

8. Does my company have to reduce interest for consumers and/or donate to the agency?

While it is not required for organizations to reduce interest charged to consumers on a Debt Management Program, it allows the consumer to pay 100% of their principal back, becoming debt-free in a reasonable amount of time. The likelihood of success increases when creditors support the DMP through interest elimination.  

Organizations are also not required to donate money back to non-profit credit counselling agencies. However, these funds contribute to keeping the services free for anyone who reaches out for help. It should be noted that agencies are not funded by the government to offer free financial counselling or education. 

9. Why should my organization trust non-profit credit counselling?

The non-profit credit counselling sector has been serving consumers for over 50 years. Agencies are required to be a registered non-profit organization; licensed through Consumer Protection in every province they serve; and credit counsellors must achieve their Accredited Financial Counsellor certificate. Furthermore, agencies must be accredited through Credit Counselling Canada or another association.

10. What are the benefits of working with non-profit credit counselling?

• Your customers will have access to free financial counselling, budget assistance, and financial education. 
• Your customers, if appropriate, can repay their 100% of their principal owing to you through the DMP.
• Your customers will learn better money management skills and become more responsible borrowers.

11. When would it be appropriate to refer a consumer to NPCC and what will they do?

12. How does my company start working with NPCC?

You can reach out to Credit Counselling Canada, the national association for non-profit credit counselling, who would be happy to welcome your company to our extensive network of creditors.