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. by Steve Rhode
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