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Why is Credit Counseling Stumped Demand is Down?

Over the past couple of weeks I’ve noticed a wave of information appearing on the web about the decrease in demand for credit counseling services. The reason given seems to be “consumer fatigue.”

The peak client numbers that nonprofit consumer credit counselors saw in 2009 appear to be slowly falling. NFCC member agencies in the Ninth District began to see a gradual decrease in client volume in 2010. For example, The Village Family Service Center saw a slight drop-off beginning in June and July. As of September, Sheri Ekdom projected calendar year 2010 would show a 7 to 8 percent decrease in client volume compared to 2009 numbers.
While the decline could be read as a sign that the economy is improving, counselors attribute it to other factors. According to Tom Jacobson of CCCS of Montana, the decline is due in part to competition from dubious debt-settlement companies and in part to recent efforts by credit card companies to circumvent nonprofit counseling agencies. Some credit card issuers have launched in-house credit counseling operations that negotiate directly with selected debtors. The practice has raised concern among some consumer advocates, because credit card companies may have an interest in seeing their own claims paid first, even though that might not be what’s best for their customers’ overall financial situations.

Another factor in the declining client numbers, according to multiple counselors in the Ninth District, is consumer fatigue or economic fatigue.

“I don’t have scientific proof of this, but I think there are people who are getting tired and maybe making a choice of not doing anything,” says Sheri Ekdom. “We’ve worked with some people on their housing situations for five, six, seven months, and they’re not getting anywhere with the lender. There’s a sense of ‘Why should I continue?’ ” – Source

You’ve got to shake your head at the credit counseling attributed statement, “…recent efforts by credit card companies to circumvent nonprofit counseling agencies.” How is it possible for creditors to circumvent their own relationship with their own customers?

Credit card companies offer internal hardship programs and term reductions to their consumers they feel it is appropriate to do so for. That’s not a mystery or inappropriate in my book.

A news interview in Minnesota also presented the “consumer fatigue” talking point.

Jim Kroening, of the Stillwater-based non-profit Family Means says their office has seen a 30 percent drop, and he worries that people are turning to the myriad for-profit, debt-elimination companies that advertise on late night TV.

What continues to strike me as just plain odd or misdirected is the opinion by credit counseling groups and apparently the National Foundation for Credit Counseling (NFCC) that the downturn in demand is due to debt settlement companies or the housing situation.

I’ve covered the trends on this topic for a while now and have covered the underlying issues in depth.

I still struggle to wonder why the credit counseling industry can’t stop focussing on debt settlement as the reason for their ills and deal with the true underlying problem, more and more consumers can’t afford creditor term dictated debt management plans. It’s not a mystery.

And as far as decreased demand, it’s been a few years since consumers loaded up on debt and as more time passes the demand for relief services will continue to fall.

It would be nice to see credit counseling deal with the real underlying issues here then try to point blame at debt settlement today or creditor hardship programs.

The real problem is credit counseling groups only offer creditor dictated terms to consumers in trouble. The terms are not sufficient to meet current consumer needs. Creditors also control the services credit counseling groups can offer by holding the withdraw of fairshare funding over their head. Now that’s an issue to deal with, not “consumer fatigue.”

Why is Credit Counseling Stumped Demand is Down?
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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.
  • Question

    Are CCA’s  an indirect marketing arm of the debt settlment industry – Since cca’s generate interest in debt relief help but dont offer settlement and the fact a sizable amount of consumers can not afford a DMP thus the business model of the CCAs appears to drive consumers to settlment as this is an option the consumer can afford.

    • Cupid

      Hey Question – Debt Wave was as were and/or are others (marketing and making bank on settlement).

      The nonprofits are fast becoming irrelevant. And they are whining openly about it. Settlement companies are not to blame. The nonprofits themselves are to blame. They won’t accept that fact, but it does not change it. How many people do you know that readily accept responsibility for the position they are in? Not many. The tendency is to look for outward reasons to blame before accepting responsibility. Many never look inward and are incapable.

      I posted some lengthy thoughts in response to someone (Errick) I think is a DMP-er over on this thread:
      http://getoutofdebt.org/31142/leaked-document-says-debtconnect-online-part-of-settlement-process-for-persels-associates#comment-340670831

      If you read my comment over there, I would be interested in your reaction to how I come to a conclusion that DMP-ers actually do not serve consumers well nor are they contributing to nation as a whole.

      Thanks hon.

      “Now get in the pit and try to love someone”.

      • Cviale

        .  hi cupid, I have to disagree with your comment about dmp’s not serving consumers well. If you take a look at our transparency project a well constructed dmp with a full support system of financial education to help inform,equip and guide consumers to truly work on there financial well being bears out success. Simply putting a consumer on a plan to pay of debt is not enough. Go to http://www.cambridgecredit.org and look at the data on the transparency section of the website. I do agree with many of the comments on this chain and others on the site about the fact that the nonprofit credit counseling profession is missing the boat on the less then full balance repayments options that absolutely need to be available to consumers. Here at cambridge we do not offer any type of less then full balance program and its primarily due to creditor influence. Our profession went to the creditors asking for better consessions and pleaded with them and they came to the table and responded with the call to action hardship plans. Were the consessions enough? well at the time it was better then no reponse but the real question was how was the profession going to handle this new tool. as some expected many handled this new tool with abuse and some agencies were offering these new conssessions as a sales tool rather then a need based program.A couple agencies offered the new plan to almost all of there dmp’s.If our profession did a better job with this program maybe the creditors would trust us with additional tools such as a true less then full balance program. but for now if i were them i would have a hard time letting our profession have the capability to reduce balances without some kind of a tool that clearly identifies the level of need or consessions the consumer has to have to be able to repay there debt. the end of the day who’s getting hurt? clearly the consumer!!!!!!!!  consumers are absolutely not being served as well as we can,  truth   christopher  

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