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Dear Credit Counselors, You Are Your Own Worst Enemy.

Dear Credit Counselors, You Are Your Own Worst Enemy.

I’m frustrated.

For the life of me I can’t understand why credit counseling continues to look at debt settlement as the enemy. The anger and desire to kill the solution seems to be opposite of what a charitable industry should be trying to do.

The other day over a delicious Cracker Barrel lunch I was asked which side of the fence I’m on. The question really struck me. First, I didn’t realize I needed to be on one side or the other. Second, my allegiance is to the consumer, not the industry. I’m on the side of the consumer and that side should be all sides. We need to tear down that fence.

Granted, there were a lot of bad players in the debt settlement world that were charging consumers in advance and never delivering the services. The FTC Telemarketing Sales Rules put in place in 2010 went a long way towards clearing that out. And all that is left to deal with are the attorney model loophole groups that continue that effort. But action is in the works to deal with that. All eyes are on Illinois and the Attorney General suit against Legal Helpers Debt Resolution as a watershed case. It will just take some time.

But the more I hear the rustle of conversations from friends and contacts from the credit counseling world, the more I’m either angry or perplexed, I’m not sure which is the prevalent feeling yet. And the reason I’m feeling this way is because leaders in the credit counseling field are making moves and taking action that does not help consumers in the long run but instead cuts their own throats and restricts their chances to survive moving forward.

If we believe that credit counseling is a charitable field that should serve consumers and save those that need saving then how does one resolve the fundamental issue that while credit counseling wants to speak out against debt settlement, they do little to speak out about their own broken product, the debt management plan.

Credit counseling also does little to nothing to speak out about bad creditor practices. A true cynic might say that this lack of speaking out is subconsciously controlled by the fact the credit counseling pay comes from creditors. Having run a credit counseling agency myself I’d say the creditor funding absolutely hampers credit counseling charitable groups from doing the right thing.

Ponder this, when was the last time the National Foundation for Credit Counseling (NFCC) came out proactively against creditor policies or spoke out about the fact the debt management plan does not provide enough relief for many consumers?

I took a look at the NFCC press releases and all I could find was that in May 2010 the NFCC came out in support of cutting debt settlement fees to 5% of debt. In May 2009 they published a release in support of Cuomo’s debt settlement investigation, and I couldn’t even spot a press release they put out support or pushing for the CARD act to protect consumers. There certainly wasn’t a release talking about how creditors cutting their funding and the damage that does to consumers.

Credit counseling does itself and the consumers they are created to serve a terrible disservice by continuing this us against them battle against debt settlement.

Credit counseling needs to open their eyes to see this field needs to change and in the world today, the responsibility is to provide consumers with best advice about ALL debt solutions and not just to drive people to DMPs.

I see a future where we stop talking about credit counseling and debt settlement and instead convert this industry into one called debt relief where both for profit and nonprofit providers exist.

For the sake of consumers that need good help they can trust, this needs to stop being a turf war as quickly as possible. Consumers need the best advice possible from all debt relief providers and not to be just sold the widget at hand on that side of the fence.

Modern debt relief consists of credit counseling, debt settlement, and bankruptcy. The nuanced variations include an understanding about chain of custody of old debt, statute of limitations and other underlying issues.

Debt settlement is an appropriate solution to use at times, just like credit counseling is, at times, but they are not mutually exclusive, they are each different tools that a skilled provider can use to BEST help the consumer.

As credit counseling continues their attack on debt settlement you have to ask, can they really be that shortsighted? Can they really want to box themselves into a no-income corner at the same time they beg for more from the creditors? How can credit counseling leadership even think that’s a good idea. It makes no sense, it’s not logical, it’s like lining up the last nail to be driven.

I have to wonder, if NFCC isn’t taking the lead to push and fight for all solutions that are best for the consumer, their charitable class of members they serve, is there an undercurrent they serve the creditors first and distribute their wishes to member agencies?

And for those credit counselors that think killing off debt settlement creates a larger market share for your product, you are flat out dead wrong. The underlying issue with the debt management product is that it’s fundamentally broken and does not provide consumers with meaningful breathing room to financially recover in tough times. On top of that you need to understand dwindling enrollment is a function of the extended recession, not debt settlement at this point.

Dear credit counselors, it’s time to get real and look in a mirror if you want to survive. And if you want to talk about this then come to the July, 2011 free class in Raleigh and let’s take an honest look at the future.

The ball is in your court. Now is not the time to lose it over the fence. Now is the time to play it wisely.

Dear Credit Counselors, You Are Your Own Worst Enemy.
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Fitz

    DS is not fundamentally flawed anymore that CC is fundamentally flawed. It’s execution can be flawed, be it DS or CC, that’s for sure. The “fundamental flaw”, if any, occurs when only one option is offered to the client. Human nature is to sell your product, not the other guy’s. The fiduciary duty is very difficult to assess, let alone enforce. It seems the only way to rise above the accusation of violating this duty is to remove the financial motivation of offering one product over the other. It seems this is best acheived by offering all options, DC, DMP, or BK. Until this is done, even the most ethical CC or DS provider will be subject to the accusation of promoting its own interests over its client. In the meantime, debating legitimacy only works to the creditor benefit. We should be debating standards to qualify consumers for particular services.

  • Steve Rhode

    Excellent point raised here by Melissa about a fiduciary duty of credit counselors. It’s a point worth discussing further. 

    Please see Does Credit Counseling Have a Fiduciary Duty to Mention Ethical Debt Settlement to Consumers?

  • http://GetOutOfDebt.org Steve Rhode

    Excellent point raised here by Melissa about a fiduciary duty of credit counselors. It’s a point worth discussing further. 

    Please see Does Credit Counseling Have a Fiduciary Duty to Mention Ethical Debt Settlement to Consumers?

  • When will it end?

    In reply to James, yes rare cares when the client is already well past due meaning 6 months or more.

    And to all of you that work for DSC I find it insulting that you think I dont offer all the options to my clients. Because I’m sure you all recommend to your clients to enroll in a DMP “when its in the clients best interest.Yeah, and I’m Thomas Jefferson. Please!  The facts are the facts you represent a poor service that destroys clients credit bilkes thousands and thousands in fees and opens them up to lawsuit wage garnishment and income tax ramifications. Done Period! End of Discussion, you dont have answers to those facts

    So all of you can try to justify your existance by now trying to say well after 10/2010 we are all rehabilitated and we do it the right way and we explain it. Stop!

    The service is fundamentally flawed.

  • Robert M

    OK, so you know the fundamentals of DS and only in “rare cases” do you think it appropriate for your client. You mentioned in your earlier post the perhaps the status quo and the creditors don’t want non-profit CC”s involved in DS, is this a reason not to consider this option?  Do-It-Yourself DS is certainly not for everyone and you will “never ever refer a client to a DSC”, so I wonder if there might be some of your clients who sometimes aren’t getting the most complete picture of debt relief options available to them from you.

  • When will it end?

    In reply to Jane, Now I dont understand the fundamentals of DS? I think you are speaking out of school believe me Jane I have been trained and DS is recommended in rare cases according to the situation. But I would never ever refer a client to a DSC. I will instruct the client to do it on thier own.

  • Melissa

    Steve, Jane did raise a good point and her comment on debt counselors not learning the fundamentals of DS I also agree with. Fudiciary duty to your client also applies to those in DS, I know there are many DS companies that have done what our company has and have had their staff take credit counseling training and received the certification to prove it. These people can now intelligently discuss credit counseling and DMP’s with their client and advise the client better on the best option. I agree with Jane’s comment doubting mant CC companies have taken the time to have their staff learn about DS, they do seem to have their heads in the sand.

  • Steve Rhode

    Jane,

    You raise a very good point about protecting the credit counselor from liability. If they fail to include it in the mix, yet it is a viable solution, have they harmed the consumer by not mentioning it. Now that’s a lawsuit waiting to happen. I’ll be sure to bring that up at the upcoming debt relief master class.

  • Jane

    I should add that it’s more than your job, it’s your fudiciary duty to your client to advise on the best debt relief option. I’m not sure that all credit counselors even know the fundamentals of debt settlement, I doubt that many have taken any training on this.

  • Jane

    creditors just want to collect as much of their money as they can as fast as they can and debtors just want to be out of debt as fast as they can. There are several options to accomplish what both want and as a fully qualified & trained debt relief professional isn’t it your job to find the best solution DS, DMP or BK?

  • When will it end?

    That is a good point on the fees. Why? you ask I havn’t got a clue! Maybe its just the status quo and the creditors dont want to a non-profit to do get involved?

  • Steve Rhode

    So why not charge the same DMP fee to help consumers out with debt settlement? Nobody says you have to charge that much.

    I think you are talking about the LTFB solution which was shot down by creditors but yet they settle debt every day. Why?

    A DMP is not a budgeting tool, it’s a debt reduction tool. So if debt settlement is also, what’s the problem and why would creditors shoot it down from you but accept it from others?

  • When will it end?

    Steve I couldn’t reply above. Yes we charge for a DMP but $75 to enroll and a max fee of $50 a month is a far cry from 15-20% of the total debt load.  
    The goal of the agency to is to coach and counsel consumers to a sound budget and possible enrollment in a DMP.   But the hybrid approach has already been shot down by the creditors so what are we still discussing it like its an option?

  • Steve Rhode

    Question: What is the goal of your agency when it comes to consumers?

  • Steve Rhode

    So debt settlement is not a consideration if a DMP is not affordable for the consumer even though a hybrid approach might provide the consumer with a solution other than bankruptcy?

    Don’t you charge to do DMPs?

  • When will it end?

    Most hardship terms are short term and there is only a few creditors that offer long term 3-5 years with low rates. The benefit? enrolling all there accounts and getting a decent rate on all not some. Accounts are closed and paid in 60 payments or less.

    If my agency did settlement they would have to charge to do it that is my point! Consumer can do it for free, by the process of delinquency.

  • Steve Rhode

    It’s the same issue. If you object to telling a consumer not to pay then credit card, a loan payment it is still a debt instrument.

    If the issue is the DSC then why do we need credit counseling when consumers could call their own creditors and get hardship terms? Does a good credit counseling agency provide the consumer with a benefit? If so, what?

    So if settlement is fine, why doesn’t your agency do settlement?

  • When will it end?

    Steve I’m not sure how this comment applies to credit cards when it looks like you are refering to a loan modification.  

    And I think you may misunderstand what I’m saying. Settlement on its own is fine when done by the consumer my problem is the DSC not settlement itself.

  • Kim

    yes, years ago I had that with Chase. How crazy is that – I was told do not pay for 3 months and then we will lower your interest rate

  • Steve Rhode

    For anyone interested in talking about the business of credit counseling in a more private setting I just created a private group for this in our community section. See Credit Counseling, Consumer Credit Counseling Business Group

  • http://GetOutOfDebt.org Steve Rhode

    For anyone interested in talking about the business of credit counseling in a more private setting I just created a private group for this in our community section. See Credit Counseling, Consumer Credit Counseling Business Group

  • Melissa

    our company comes from debt settlement and we are here for the long haul, all of our individual consultants (20+) recently completed the training and added the new Certified Credit Counseling Specialist designation to our Certified Debt Specialist designation. We now have the basic understanding and knowledge of credit counseling to be able to intelligently discuss this option with a potential client. Credit counseling companies can do this too, not sure why they to only focus on what they offered in the past?

  • Steve Rhode

    And here is the silly thing, they wouldn’t have to switch their tax status to offer more solutions to consumers that are counting on them for real comprehensive help.

    So let’s run through this. They’d be able to help more consumers, earn more income, and their cost per acquisition of new clients would drop.

    There is nothing logical in credit counseling fighting against debt settlement at this point.

  • Ed

    I don’t understand why credit counselors don’t consider switching to a for profit credit counseling business model and include debt settlement services, this just seems like such a no brainer Steve. Lose the the relationship with the creditor and their fair share payments…consumer wins!

  • Steve Rhode

    First off, nice picture. LOL

    I think your question presumes creditors operate as a cohesive unit. I can’t tell you how many times I’ve either personally witnessed or heard about a creditor refusing a settlement only to make a lower offer the same day by mail. One hand does not know what the other hand is doing.

    On some level it is a simple time value of money equation. Settle now for 50% cash in hand in six payments or sell it now for eight cents on the dollar. I’m seeing more evidence of creditors holding on to accounts now to get more out of them than sell. In that case they will be more open to settlement offers that increase their return by 400%.

    DSC or no DSC, the underlying issue is the creditors are settling at the same time the credit counselors are not using that as a valid strategy in the mix to draw from. 

    Ultimately I can’t speak about the banks POV because as one contact told me at the bank, “I’m not sure what’s going to happen a month from now.”

    But what I do know is that credit counseling companies are bashing debt settlement and want to bring back 5% fees for debt settlement companies at the same time their funding has been cut to historic levels and their primary product, the DMP, is broken. 

    The time has come for credit counseling to elevate itself from a DMP provider to a broader and more professional debt relief solution provider and provide solutions for people other than an unaffordable DMP payment.

  • david clayton

    Steve, perhaps it’s because they consider high the fees paid to settlement companies should go to them, instead of 3rd parties. Consider the view from banks point of view? Settle with the consumer directly , with no fees to the DSC, the settlement comes quicker, they have control and they recieve more $$ Less BK
    Don’t you think it’s in the banks best interest to keep all debt relief companies in limbo? This way the have control and make the relief programs the bad guys?

  • Angelo

    It’s like telling your boss off and expecting to keep your job.  Dont bite the hand that feeds you unless you are willing to quit.  Let’s see who has the balls to tell their boss to take this job and shove it.

  • Steve Rhode

    Excellent comment.

    So here is one point that credit counseling can’t seem to get past. If creditors say they hate debt settlement and won’t settle debt then why do they accept settlements every day of the week? Could it be they just want to keep credit counselors boxed in where they want them?

  • Angelo

    Settlement companies have nothing to lose and everything to gain by offering every solution to the consumer.  Credit counseling would have to be willing to lose fair share in order for them to accept settlement.  They hate settlement because the banks that pay them fair share tell them to hate settlement.  Maybe more exposure, like this article, showing that they are acting in their best interest instead of the consumers best interest would entice them but Im not holding my breath….

  • Angelo

    Settlement companies have nothing to lose and everything to gain by offering every solution to the consumer.  Credit counseling would have to be willing to lose fair share in order for them to accept settlement.  They hate settlement because the banks that pay them fair share tell them to hate settlement.  Maybe more exposure, like this article, showing that they are acting in their best interest instead of the consumers best interest would entice them but Im not holding my breath….

    • http://GetOutOfDebt.org Steve Rhode

      Excellent comment.

      So here is one point that credit counseling can’t seem to get past. If creditors say they hate debt settlement and won’t settle debt then why do they accept settlements every day of the week? Could it be they just want to keep credit counselors boxed in where they want them?

      • Angelo

        It’s like telling your boss off and expecting to keep your job.  Dont bite the hand that feeds you unless you are willing to quit.  Let’s see who has the balls to tell their boss to take this job and shove it.  

      • http://profiles.google.com/keywestdave david clayton

        Steve, perhaps it’s because they consider high the fees paid to settlement companies should go to them, instead of 3rd parties. Consider the view from banks point of view? Settle with the consumer directly , with no fees to the DSC, the settlement comes quicker, they have control and they recieve more $$ Less BK
        Don’t you think it’s in the banks best interest to keep all debt relief companies in limbo? This way the have control and make the relief programs the bad guys?

      • http://GetOutOfDebt.org Steve Rhode

        First off, nice picture. LOL

        I think your question presumes creditors operate as a cohesive unit. I can’t tell you how many times I’ve either personally witnessed or heard about a creditor refusing a settlement only to make a lower offer the same day by mail. One hand does not know what the other hand is doing.

        On some level it is a simple time value of money equation. Settle now for 50% cash in hand in six payments or sell it now for eight cents on the dollar. I’m seeing more evidence of creditors holding on to accounts now to get more out of them than sell. In that case they will be more open to settlement offers that increase their return by 400%.

        DSC or no DSC, the underlying issue is the creditors are settling at the same time the credit counselors are not using that as a valid strategy in the mix to draw from. 

        Ultimately I can’t speak about the banks POV because as one contact told me at the bank, “I’m not sure what’s going to happen a month from now.”

        But what I do know is that credit counseling companies are bashing debt settlement and want to bring back 5% fees for debt settlement companies at the same time their funding has been cut to historic levels and their primary product, the DMP, is broken. 

        The time has come for credit counseling to elevate itself from a DMP provider to a broader and more professional debt relief solution provider and provide solutions for people other than an unaffordable DMP payment.

      • Ed

        I don’t understand why credit counselors don’t consider switching to a for profit credit counseling business model and include debt settlement services, this just seems like such a no brainer Steve. Lose the the relationship with the creditor and their fair share payments…consumer wins!

      • http://GetOutOfDebt.org Steve Rhode

        And here is the silly thing, they wouldn’t have to switch their tax status to offer more solutions to consumers that are counting on them for real comprehensive help.

        So let’s run through this. They’d be able to help more consumers, earn more income, and their cost per acquisition of new clients would drop.

        There is nothing logical in credit counseling fighting against debt settlement at this point.

      • When will it end?

        Steve I couldn’t reply above. Yes we charge for a DMP but $75 to enroll and a max fee of $50 a month is a far cry from 15-20% of the total debt load.  
        The goal of the agency to is to coach and counsel consumers to a sound budget and possible enrollment in a DMP.   But the hybrid approach has already been shot down by the creditors so what are we still discussing it like its an option?

      • http://GetOutOfDebt.org Steve Rhode

        So why not charge the same DMP fee to help consumers out with debt settlement? Nobody says you have to charge that much.

        I think you are talking about the LTFB solution which was shot down by creditors but yet they settle debt every day. Why?

        A DMP is not a budgeting tool, it’s a debt reduction tool. So if debt settlement is also, what’s the problem and why would creditors shoot it down from you but accept it from others?

      • When will it end?

        That is a good point on the fees. Why? you ask I havn’t got a clue! Maybe its just the status quo and the creditors dont want to a non-profit to do get involved?

      • Jane

        creditors just want to collect as much of their money as they can as fast as they can and debtors just want to be out of debt as fast as they can. There are several options to accomplish what both want and as a fully qualified & trained debt relief professional isn’t it your job to find the best solution DS, DMP or BK? 

      • Jane

        I should add that it’s more than your job, it’s your fudiciary duty to your client to advise on the best debt relief option. I’m not sure that all credit counselors even know the fundamentals of debt settlement, I doubt that many have taken any training on this.

      • http://GetOutOfDebt.org Steve Rhode

        Jane,

        You raise a very good point about protecting the credit counselor from liability. If they fail to include it in the mix, yet it is a viable solution, have they harmed the consumer by not mentioning it. Now that’s a lawsuit waiting to happen. I’ll be sure to bring that up at the upcoming debt relief master class.

      • Melissa

        Steve, Jane did raise a good point and her comment on debt counselors not learning the fundamentals of DS I also agree with. Fudiciary duty to your client also applies to those in DS, I know there are many DS companies that have done what our company has and have had their staff take credit counseling training and received the certification to prove it. These people can now intelligently discuss credit counseling and DMP’s with their client and advise the client better on the best option. I agree with Jane’s comment doubting mant CC companies have taken the time to have their staff learn about DS, they do seem to have their heads in the sand.

      • When will it end?

        In reply to Jane, Now I dont understand the fundamentals of DS? I think you are speaking out of school believe me Jane I have been trained and DS is recommended in rare cases according to the situation. But I would never ever refer a client to a DSC. I will instruct the client to do it on thier own.

      • Robert M

        OK, so you know the fundamentals of DS and only in “rare cases” do you think it appropriate for your client. You mentioned in your earlier post the perhaps the status quo and the creditors don’t want non-profit CC”s involved in DS, is this a reason not to consider this option?  Do-It-Yourself DS is certainly not for everyone and you will “never ever refer a client to a DSC”, so I wonder if there might be some of your clients who sometimes aren’t getting the most complete picture of debt relief options available to them from you.

      • When will it end?

        In reply to James, yes rare cares when the client is already well past due meaning 6 months or more.

        And to all of you that work for DSC I find it insulting that you think I dont offer all the options to my clients. Because I’m sure you all recommend to your clients to enroll in a DMP “when its in the clients best interest.Yeah, and I’m Thomas Jefferson. Please!  The facts are the facts you represent a poor service that destroys clients credit bilkes thousands and thousands in fees and opens them up to lawsuit wage garnishment and income tax ramifications. Done Period! End of Discussion, you dont have answers to those facts

        So all of you can try to justify your existance by now trying to say well after 10/2010 we are all rehabilitated and we do it the right way and we explain it. Stop!

        The service is fundamentally flawed.

      • Fitz

        DS is not fundamentally flawed anymore that CC is fundamentally flawed. It’s execution can be flawed, be it DS or CC, that’s for sure. The “fundamental flaw”, if any, occurs when only one option is offered to the client. Human nature is to sell your product, not the other guy’s. The fiduciary duty is very difficult to assess, let alone enforce. It seems the only way to rise above the accusation of violating this duty is to remove the financial motivation of offering one product over the other. It seems this is best acheived by offering all options, DC, DMP, or BK. Until this is done, even the most ethical CC or DS provider will be subject to the accusation of promoting its own interests over its client. In the meantime, debating legitimacy only works to the creditor benefit. We should be debating standards to qualify consumers for particular services.

  • Steve Rhode

    I agree. It makes no sense. One plausible explanation is creditors have been gently pushing credit counselors that debt settlement is bad but yet they settle. Or maybe credit counseling has invested so much in making debt settlement the bad guy to fight against they overlooked that there are ways to settle debt successfully.

  • Steve Rhode

    This appeared in another story but it reminded me of your “don’t pay” observation.

    “Both contacted the bank before even missing a payment to see what steps to take, because they’d taken a hit to their income. Both say Bank of America employees told them they’d have to fall at least three months behind to be considered for a modification…” – Source

  • Marty

    and getting the necessary training about the debt settlement process is so damned easy, debt settlement people are taking training in credit counseling. Credit counselors seem much more resistant to learning about the other options and this can only hurt them in the long run in my opinion.

  • Steve Rhode

    I completely agree. There are so many advantages to them learning how to incorporate debt settlement. Take for example the person they would have otherwise turned away where they could instead settle one debt and then give the person enough breathing room to afford the DMP. But instead the current approach seems to be to send that consumer to bankruptcy. There is no apparent consideration of any hybrid solution from the credit counseling side.

  • James

    from what I have read and observed it seems to me that more from the debt settlement side are learning about what credit counseling is than those from credit counseling learning about debt settlement, credit counseling seems to have their head in the sand when it comes to doing business in the new debt relief industry.

  • Steve Rhode

    Offering more solutions that are good and appropriate results in fewer consumers turned away that are looking for solutions.

    In a time when there are fewer consumers searching for debt relief help, it makes no sense to turn someone away that you can help by assisting them to overcome their problem. Not only does it harm the consumer looking for good solutions but it needlessly drives up marketing costs as well for the credit counseling company.

  • Jonas

    Agreed, and the people working in the debt relief industry in these times need to learn and completely understand all of the options for the debtor to be able to give credible advice. It didn’t use to be that way, consumers had to contact credit counseling and debt settlement companies separately and compare the options for themselves.

  • Steve Rhode

    I hear you and I’ve never said that debt settlement is “a viable option for a good amount of consumers.” But then again nobody can show that DMPs are “a viable option for a good amount of consumers” either. It’s not an either or, it’s a matter of gathering all the tools available to assist consumers rather than turning them away.

    If debt settlement is not a viable option for creditors then why do they send out offers every single day to their cardholders making proactive offers with favorable repayment terms that are better than counseling can offer? Why are debt buyers taking 50% settlements on 36 month repayment plans?

    There are people that counseling is turning away that can settle. But counseling still thinks of consumers with a monthly payment mindset when that’s not the way good debt settlement works. The industry has changed dramatically since 10-2010.

  • When will it end?

    Steve, I understand your analysis of this is to be in the best interest of the consumer, but no one can show me the hard facts that debt settlement is a viable option for a good amount of consumers. Now I know we have went over this before, but I stand by the fact that DSC’s are asking current consumers to stop paying their bills.  Beat the dead horse again and again creating large fees and lawsuits and tax ramifications. Now some players on this site we’ve debated have stated they can settle in 12-18 months that is still severe deliquency.  And forget the fees just that Debt Settlement is fundamentally flawed. 

    On counseling you state not enough relief for the consumer how much is enough? average payment savings is $200-300 a month. If current you were paying more than that but no the DSC cuts the payment in half to lure the consumer in legitimate DSC or not. It’s the human nature of I can get a better deal. If CCCS payment savings is not enough than file bankruptcy simple as that period! Now of course we want lower payments and counseling has its conflict with the creditors. I’m trying to be open minded here but I just cant agree that debt settlement is a fundamentally sound financial decision.  And please don’t say ” its good for some people and no service is for everyone” I’m aware of that but the facts are the facts that its a service based on non payment and charge off deliquency.

  • When will it end?

    Steve, I understand your analysis of this is to be in the best interest of the consumer, but no one can show me the hard facts that debt settlement is a viable option for a good amount of consumers. Now I know we have went over this before, but I stand by the fact that DSC’s are asking current consumers to stop paying their bills.  Beat the dead horse again and again creating large fees and lawsuits and tax ramifications. Now some players on this site we’ve debated have stated they can settle in 12-18 months that is still severe deliquency.  And forget the fees just that Debt Settlement is fundamentally flawed. 

    On counseling you state not enough relief for the consumer how much is enough? average payment savings is $200-300 a month. If current you were paying more than that but no the DSC cuts the payment in half to lure the consumer in legitimate DSC or not. It’s the human nature of I can get a better deal. If CCCS payment savings is not enough than file bankruptcy simple as that period! Now of course we want lower payments and counseling has its conflict with the creditors. I’m trying to be open minded here but I just cant agree that debt settlement is a fundamentally sound financial decision.  And please don’t say ” its good for some people and no service is for everyone” I’m aware of that but the facts are the facts that its a service based on non payment and charge off deliquency.

    • http://GetOutOfDebt.org Steve Rhode

      I hear you and I’ve never said that debt settlement is “a viable option for a good amount of consumers.” But then again nobody can show that DMPs are “a viable option for a good amount of consumers” either. It’s not an either or, it’s a matter of gathering all the tools available to assist consumers rather than turning them away.

      If debt settlement is not a viable option for creditors then why do they send out offers every single day to their cardholders making proactive offers with favorable repayment terms that are better than counseling can offer? Why are debt buyers taking 50% settlements on 36 month repayment plans?

      There are people that counseling is turning away that can settle. But counseling still thinks of consumers with a monthly payment mindset when that’s not the way good debt settlement works. The industry has changed dramatically since 10-2010.

      • Jonas

        Agreed, and the people working in the debt relief industry in these times need to learn and completely understand all of the options for the debtor to be able to give credible advice. It didn’t use to be that way, consumers had to contact credit counseling and debt settlement companies separately and compare the options for themselves.

      • http://GetOutOfDebt.org Steve Rhode

        Offering more solutions that are good and appropriate results in fewer consumers turned away that are looking for solutions.

        In a time when there are fewer consumers searching for debt relief help, it makes no sense to turn someone away that you can help by assisting them to overcome their problem. Not only does it harm the consumer looking for good solutions but it needlessly drives up marketing costs as well for the credit counseling company.

      • James

        from what I have read and observed it seems to me that more from the debt settlement side are learning about what credit counseling is than those from credit counseling learning about debt settlement, credit counseling seems to have their head in the sand when it comes to doing business in the new debt relief industry.

      • http://GetOutOfDebt.org Steve Rhode

        I completely agree. There are so many advantages to them learning how to incorporate debt settlement. Take for example the person they would have otherwise turned away where they could instead settle one debt and then give the person enough breathing room to afford the DMP. But instead the current approach seems to be to send that consumer to bankruptcy. There is no apparent consideration of any hybrid solution from the credit counseling side.

      • Marty

        and getting the necessary training about the debt settlement process is so damned easy, debt settlement people are taking training in credit counseling. Credit counselors seem much more resistant to learning about the other options and this can only hurt them in the long run in my opinion.

      • http://GetOutOfDebt.org Steve Rhode

        I agree. It makes no sense. One plausible explanation is creditors have been gently pushing credit counselors that debt settlement is bad but yet they settle. Or maybe credit counseling has invested so much in making debt settlement the bad guy to fight against they overlooked that there are ways to settle debt successfully.

      • Melissa

        our company comes from debt settlement and we are here for the long haul, all of our individual consultants (20+) recently completed the training and added the new Certified Credit Counseling Specialist designation to our Certified Debt Specialist designation. We now have the basic understanding and knowledge of credit counseling to be able to intelligently discuss this option with a potential client. Credit counseling companies can do this too, not sure why they to only focus on what they offered in the past?

    • http://GetOutOfDebt.org Steve Rhode

      This appeared in another story but it reminded me of your “don’t pay” observation.

      “Both contacted the bank before even missing a payment to see what steps to take, because they’d taken a hit to their income. Both say Bank of America employees told them they’d have to fall at least three months behind to be considered for a modification…” – Source

      • Kim

        yes, years ago I had that with Chase. How crazy is that – I was told do not pay for 3 months and then we will lower your interest rate

      • When will it end?

        Steve I’m not sure how this comment applies to credit cards when it looks like you are refering to a loan modification.  

        And I think you may misunderstand what I’m saying. Settlement on its own is fine when done by the consumer my problem is the DSC not settlement itself.

      • http://GetOutOfDebt.org Steve Rhode

        It’s the same issue. If you object to telling a consumer not to pay then credit card, a loan payment it is still a debt instrument.

        If the issue is the DSC then why do we need credit counseling when consumers could call their own creditors and get hardship terms? Does a good credit counseling agency provide the consumer with a benefit? If so, what?

        So if settlement is fine, why doesn’t your agency do settlement?

      • When will it end?

        Most hardship terms are short term and there is only a few creditors that offer long term 3-5 years with low rates. The benefit? enrolling all there accounts and getting a decent rate on all not some. Accounts are closed and paid in 60 payments or less.

        If my agency did settlement they would have to charge to do it that is my point! Consumer can do it for free, by the process of delinquency.

      • http://GetOutOfDebt.org Steve Rhode

        So debt settlement is not a consideration if a DMP is not affordable for the consumer even though a hybrid approach might provide the consumer with a solution other than bankruptcy?

        Don’t you charge to do DMPs?

      • http://GetOutOfDebt.org Steve Rhode

        Question: What is the goal of your agency when it comes to consumers?

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