The borrower sends the monthly payment to the credit counseling agency, who strategically distributes the funds to each creditor in agreed upon amountsthat pay off the debt quickest.
Because credit counseling agencies work with creditors regularly, they have agreements in place to lower interest rates and waive penalties.
Unfortunately, the debt consolidation industry was dealt a black eye following the Great Recession in 2008.
Predatory lenders popped up left and right taking advantage of people who suddenly found themselves deep in debt.
This notorious technique is called debt settlement – the source of many of the problems in the years after 2008.