The CFPB says credit counseling organizations are usually nonprofits that advise and educate you on money and debts, while debt settlement companies, debt consolidation lenders and credit repair companies are typically for-profit businesses that charge for actions you can often take yourself for free.
Credit counselors usually offer free educational materials and workshops, with an initial session of about an hour. They can set up a debt management plan: you make one monthly payment to the organization, which pays your creditors. They cannot erase debts and may charge fees. They work to lower your monthly payment, such as by lengthening terms or lowering interest rates, rather than reducing what you owe. They help with budgets, get creditors to agree not to pursue collection or charge late fees during the plan, and never advise you to stop paying your debts.
Debt settlement companies offer to resolve debts for a fee, usually by lump-sum payments you save up first. Money in a settlement account still belongs to you, must be held by an independent third party under your control, and you may withdraw it any time without penalty. The CFPB cautions that many lenders do not negotiate with settlement companies, that they usually cannot get better terms than you could yourself, and that they cannot guarantee savings, timing or erasing all debts. They often advise you to stop paying creditors, even though fees and interest keep adding up, your credit suffers and collection efforts can increase.