CREDIT COUNSELING AND CONSUMER CREDIT TRAJECTORIES

Nonprofit credit counseling provides consumers with financial education, individualized financial counseling, and debt restructuring. Despite potential benefits, relatively little is known about its efficacy. This study uses administrative data to assess the relationship between counseling and consumer credit outcomes. We estimate difference-in-difference models to analyze credit outcomes for a counseled group relative to a matched comparison group for six quarters after a baseline period. We find evidence of a substantial credit shock around the time of counseling. Post-treatment, counseling is associated with a persistent reduction in debt even after accounting for bankruptcies, foreclosures, debt charge-offs, or participation in debt consolidation programs. (JEL D12)