Latest Posts
Home > Debt Relief Industry > Credit Counselors Clueless. I Have a Dream of a Better Debt Relief Industry

Credit Counselors Clueless. I Have a Dream of a Better Debt Relief Industry

Recently I had a chance to listen to a conference call of non-profit credit counseling agencies. It was a highly enlightening hour of my life and confirmed what I was hoping was not true. I’m sad to tell you today, after listening to the call, the majority of the non-profit credit counseling agencies don’t have a clue what their own industry is all about or how to offer debt relief services. It might be a sad and blanket inditement but it’s an honest observation.

The highlight of the call for me was after much complaining about creditors not valuing the services the credit counselors provide, one participant said, “It’s almost like they treat us as if we are a charity.” I got news for you, you are a charity!

There were at least 38 participants on the call and of the participants only one that spoke up actually had a clue about their own industry.

Others were saddened that creditors did not put much value on the services they provide, another was saying how fair share funding from creditors was down to 3 percent of money returned to creditors, another said they were not even sure if a number of credit counseling companies would even be around in a couple of years.

It’s the essence of credit counseling that seems to be lost. The reality is that the core benefit to creditors is to talk consumers out of bankruptcy and into a repayment program that returns money to creditors. All the other stuff fluffed around that is just that, fluff.

Creditors may talk about the educational and counseling benefits of non-profit credit counselors but let’s get real. As one person on the call said, “It’s like the creditors only care about making a profit and answering to shareholders.” Yes, and you know why, because that’s exactly what it’s all about. If that mission can be packed in a charitable wrapper and creditors get a tax deduction for paying for collections, then all the better for the creditors.

One participant said they were told that Chase Bank has twice as many people enrolled in internal hardship programs with their cardholders than they do with credit counseling agencies. And credit counseling agencies that were speaking up could not understand why that would be. Seriously, let’s be clear here, Chase Bank has every right to offer their cardholder reduced payment programs and not have to go through a credit counseling group. It’s their own customer. And besides, then they don’t have to pay the credit counseling agency to collect.

Credit counseling agencies may not want to publicly admit they are acting as a different type of collection agent for the creditors, but that’s always been their core economic benefit for creditors providing them with support based on the money they return to the creditors. And while this may be shocking, it’s a lesson I learned from founding and running a non-profit credit counseling agency, creditors want you to be their collectors. And that’s why I got out.

Modern credit counselors are in terrible and embarrassing denial. Tragically embarrassing.

They were lamenting on the call about new products and services they could develop to help generate revenue. Maybe financial education one said. But the most votes were for credit repair services. Would those be the very same credit repair activities that have some agencies already in hot water? You’ll consider credit repair but not helping consumers settle their debts? What kind of bigoted point of view is that?

But here is the kicker, non-profit credit counseling agencies are educational charities that assist people with debt problems. Yet the very thing they spend time making sure does not see the light of day is educational information to help consumers settle debts when they can’t afford the credit counseling debt management plan program. And why is that, because creditors have laid down the law and told some agencies if they get into debt settlement they will lose their funding from creditors. Oh yes, and they’ve vilified debt settlement for so long to protect their own marketshare that they’ve convinced themselves that it’s bad.

I Have a Dream of a Better Debt Relief Industry

Sadly an evolved and relevant debt relief industry is nowhere to be found.

What we have today is a fractionalized system that pits for-profit against non-profit. That pits debt settlement providers against credit counselors. That pits attorneys against debt relief providers.

You will notice that at no time is the consumer in financial trouble placed in any pivotal position except to be a participant in a transaction from which debt relief providers of all flavors make money off of.

My dream of a relevant and modern debt relief industry is one where:

  • consumers pay a fair fee for the help they receive;
  • debt relief providers do not accept money from creditors when the providers are supposed to be representing the consumers;
  • the tax status of the provider is irrelevant since all debt relief providers will deliver compassionate, caring, and relevant services, fairly;
  • debt relief providers will call upon each other when certain specialities are needed and to work cooperatively for the benefit of the consumer in trouble;
  • trade meetings are about developing new services to help consumers and no longer focused on protecting market share;
  • debt relief providers stand behind their work, provide refunds for work not delivered, and work WITH regulators to help stamp out bad practices;
  • all debt relief providers can speak up against bank practices from the financial services industry to protect consumers; and,
  • we all agree to really put consumers first.

In my view of a debt relief industry, all providers begin to work collaboratively and together. All providers are looking out for the best interest of the consumers, and all providers are working hard to focus light on bad practices to get those bad actors out of the industry.

Unless all debt relief providers suck it up and start working together, here is my prediction of what’s going to happen:

  1. Credit counseling groups will continue to complain about debt settlement providers and work to get more fee cap laws passed to limit settlement fees while the credit counselors sit here and scratch their heads about what new services they can develop that consumers want.
  2. Creditors will continue to reduce funding to credit counseling groups, or eliminate it completely, and many will either merge or go out of business.
  3. Creditors will offer more hardship programs to their customers directly or will take advantage of the automated programs that allow consumers to enroll in debt management plans without the need of a local credit counseling agency.
  4. The hesitancy of debt relief providers to shed light on the bad guys will leave continued opportunities for the bad actors to flourish and take advantage of consumers. That leaves the door open for more legislation in response to those bad acts which further limits the debt relief industry at large.
  5. Non-profit providers will continue to rage against for-profit providers which simply drains their time and resources will providing an entire misdirection on the real issues at hand.

The question is, can the debt relief industry pull it together and get their fundamentals straight to create a relevant and needed path into the future.

Credit Counselors Clueless. I Have a Dream of a Better Debt Relief Industry
Get Out of Debt Guy – Twitter, G+, Facebook

I can always use your help. If you have a tip or information you want to share, you can get it to me confidentially if you click here.

Credit Counselors Clueless. I Have a Dream of a Better Debt Relief Industry by

Share This and Spread the Word

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.
  • http://GetOutOfDebt.org Steve Rhode

    I received the following comment today from an emailer. I thought I’d share it with you.

    “Illegally listening in on a confidential conference call and spinning your information speaks volumes about your social contact. A lot of good work goes on in credit counseling despite the problem with creditors. Yes, the industry does need to change. People are angry and it is driving them away from both credit counseling and debt settlement. The creditor is truly the one blocking the system and the regulators have failed to address the viable products made4 availale regardless of who provides them.”

    First off, I was invited by someone to listen the conference call.

    Second, The comment reinforces the denial the credit counseling industry is in. If the creditors are such a problem and “blocking the system” then why is credit counseling accepting money from creditors and agreeing to play by the creditor rules instead of fighting back against creditor actions and control?

    Finally, if there is something that I stated that was spun or incorrect, please let me know specifically what it is.

    • Angelo

      ya, you’re the bad guy lol

    • http://www.zipdebt.com Charles Phelan

      “The creditor is truly the one blocking the system.” Yes, that was rather the point of the entire original post. How much cognitive dissonance is required to make that statement when you work for a company that is only in business at the whim of that same creditor?

    • Winchell

      Steve,

      Would you like to tell your readers who invited you to the Conference Call? Perhaps there is a very invested source who would like community based credit cunselilng to fail. I think it would help your readers understand where the source is really coming from. While I agree with a lot of the comments, I also note that you are refering folks to credit counseling despite your complete negative comments. While debt settlement needs to be a viable product, most consumers have been hurt by debt settlement companies and have subsequently filed bankrutpcy. I think the industry needs to change and a much stronger stance needs to be taken with the creditors. Look to regulation…debt management and debt settlement have not been properly regulated and the sad part is that a large majority of consumers have had to file bankruptcy because there is no regulation other than bankruptcy, which utiimately protects the consumer. Numbers are numbers and can be plugged into a formula, but behavioral change takes real counseling over an 18 month period. Do not ever think that bank want consumers to be educated. It takes the bite out of profit.

      • Winchell

        By the way Steve, I organized the Conference Call, and you did not have an invitation to join the call from me. Do you not care about personal privacy or is it just about your agenda?

      • http://GetOutOfDebt.org Steve Rhode

        I did not say you invited me. I said I was invited to attend. There was no disclaimer on the call that only a select group of people were permitted to attend. I was given the call information and invited.

      • Elizabeth

        Were you invited by the NFCC or Winchell? Because if not, then you were not legally invited.  Why do you fear  telling who gave you the information, Steve? I thought your philosophy was that everyone has the right to speak his/her opinion.  Evidently that does not include speaking it in private.  And why so bitter about the Credit Counseling Industry?  What happened to your agency?  Please share with us your full story.

        As for what you spun and/or misquoted;

        No one said the creditors are treating are treating us like a charity-the statement actually was that the creditors seem to be of the opinion that they are doing us a favor by contributing fairshare.  Huge difference, Steve.

        Debt settlement is NOT spoken of adversely by CCC agencies.  And it was not on the call.  In reality, CCC agencies have been trying for quite some time to reach a standard of debt settlement that will not push consumers into bankruptcy.

        And as for your dream, Steve, that consumers pay a fair amount for the servcie they receive, they do.  The creditors do not lower interest rates to 0% for debt management palns, and the fairshare received from the creditors comes from that interest that the client is paying. And by the way, CCC agencies work with ALL creditors, not just the ones that pay fairshare.

        Finally, how can you pretend not to know that the purpose of non-profit agencies is to educate.  Absolutely the crediotrs have the right to offer their clients lower interest rates.  But where is the education that will prevent the same situation from happening 10 years from now?  And where does the funding come from to provide the education.  Do you not see that part of it comes from fair share?   
         
        On the first page of your site there is an ad for an agency that will help you get out of debt as long as you owe a minimum of 10k.  Would you like me to explain to your readers why there is the minimum? I have seen the monthly statements that come from compnies such as these. Have you?

      • http://GetOutOfDebt.org Steve Rhode

        So let’s have an open discussion. Which credit counseling group are you with?

      • http://GetOutOfDebt.org Steve Rhode

        While I wait your answer about which agency you are with let me answer some key points you made.

        1. “the creditors seem to be of the opinion that they are doing us a favor by contributing fairshare.” Well you are either a pay-for-performance agency that collects money from consumers for a fee or you will be dependent on some random amount that creditors chose to give in a voluntary contribution like any charity. They are doing you a favor or you are being compensated for a service. Which is it?

        2. “Debt settlement is NOT spoken of adversely by CCC agencies.” I think the Wincell comment you just replied to spoke negatively about debt settlement. But what education and training do you give consumers to settle their own debt?

        3. “The creditors do not lower interest rates to 0% for debt management palns.” But they do in some of their internal hardship programs. Do you refer consumers into those programs instead of a DMP if the creditor program terms are better for the consumer?

        4. “how can you pretend not to know that the purpose of non-profit agencies is to educate.” Amen. They are educational charities. So educate and educate people about the benefits of bankruptcy and debt settlement.

        5. “And where does the funding come from to provide the education.” Well go for education funding then if that’s what people value. 

        6. “On the first page of your site there is an ad for an agency that will help you get out of debt as long as you owe a minimum of 10k.” See the site terms for information about how ads are displayed.

      • Michael

        I want to echo Steve’s sentiment in applauding Elizabeth and Winchell’s participation in the comments. Most of the articles on this site that touch on CCA topics get the cricket treatment.

        I would like to see more active CCA participation in the future.

        Why not discuss issues like the fact that one of the larger banks getting hammered on mortgage related concerns happens to be one of the most forgiving when working with consumers to settle credit card accounts pre and post charge off (for several years running). And this same bank is one of the hardest on CCA’s qualifying consumers to enter a DMP with a too low allowable discretionary dollar threshold. That too low threshold causes denials forcing consumers to seek settlement and bankruptcy. This account denial may indeed impact the accounts of other issuers with more reasonable discretionary criteria to experiences losses that would have otherwise been unnecessary.
        I read a post today on the naked capitalism blog that relates to a mortgage/foreclosure/securitization conference. A good amount of the article made me think of the CCA side of the debt relief space for a myriad of reasons, not the least of which was:
        “The overwhelming majority of knowledgeable people will be insiders, and
        whether they can admit it to themselves or not, their first loyalty will
        be to their meal ticket. Put it another way: why would you have to go
        outside the industry to find someone (and a blogger to boot) to raise
        issues that come directly out of recent court decisions and the gridlock
        in foreclosure courts if you could find people with institutional
        credentials? (In fairness, there were other skeptics, such as Adam
        Levitin and Josh Rosner, but that was a minority viewpoint)”

        http://www.nakedcapitalism.com/2011/11/denial-in-the-mortgage-industrial-complex.html

        Another part of the article is Yves reference to the multi-state settlement with banks on foreclosure abuses and the reference to settlement dollars funding housing counseling. This site is a natural place to open up more public discussion on this topic. I wrote a post centered on this and other than Andy commenting it was crickets.
        There are real issues facing service providers and consumers alike. I would like to see much more salient CCA participation on this site. I think a healthy amount of good would come from it due to the readership demographic of this site.

      • http://GetOutOfDebt.org Steve Rhode

        Forgot to ask. Was there anything that I wrote about from the call that was not correct? Please feel free to correct any fact you feel I got wrong.

      • Aussie1

        Sorry for the delay in responding. Family matters.  You first, Mr. Rhode.  Answer my question about who invited you and share with your readers what happened to your non-profit agency and the cease and desist order against you and I’ll be happy to answer more of your questions. 

      • Aussie1

        Sorry for the delay in responding. Family matters.  You first, Mr. Rhode.  Answer my question about who invited you and share with your readers what happened to your non-profit agency and the cease and desist order against you and I’ll be happy to answer more of your questions. 

      • http://GetOutOfDebt.org Steve Rhode

        By the way, I want to publicly applaud and congratulate you, seriously, for coming forward and talking publicly about the issues facing credit counseling. It is a discussion that the public needs to hear and together a solution can be crafted.

        But the issue you face, as I once did, is if you are afraid that your CCCS agency will be penalized by creditors for speaking out and taking a stronger stance. Is that a concern for you? If speaking up to change the system means you will lose some of your fair share, are you willing to do it?

      • http://GetOutOfDebt.org Steve Rhode

        By the way, I want to publicly applaud and congratulate you, seriously, for coming forward and talking publicly about the issues facing credit counseling. It is a discussion that the public needs to hear and together a solution can be crafted.

        But the issue you face, as I once did, is if you are afraid that your CCCS agency will be penalized by creditors for speaking out and taking a stronger stance. Is that a concern for you? If speaking up to change the system means you will lose some of your fair share, are you willing to do it?

      • http://GetOutOfDebt.org Steve Rhode

        Modern credit counseling serves a narrower and narrower niche, those folks that are currently behind and can afford at least their regular monthly payment. For those the DMP is still a tool to investigate, that’s why I refer them at times. But in a down economy that’s not good enough for a growing majority of consumers in trouble. And yes, as you observed, I do make credit counseling referrals to people I feel fall into that tiny gap. So any claim by you that I either want credit counseling to fail or hope it does is clearly not supported. 

        I don’t want credit counseling to fail, I want it to grow and serve the consumers in trouble with all appropriate solutions.

        I don’t bank on credit counseling failing, I’m just observing. The failure of credit counseling is yours to avoid but please share what actions you’ve taken to divest yourself of the ties that come with fair share funding and the stand you’ve taken against the actions of the creditors? Where is the press release where you express your creditor displeasure?

        Credit counseling needs to stop looking for villains and start reacting proactively to issues that are killing it. Even your own site seems to wander into troubled territory with the claim you make that accounts are brought current. That seems to be included in the core issues under CROA violation claims in the suit against InCharge.

        I’m also looking at your Statement of Counseling Services in which you say that your agency serves a role of a dual agent but you fail to mention the DMP terms are dictated by the creditor. Again, a core issue of the suit.

        The same document gives negative statements about bankruptcy but you fail to inform the consumer that under a Chapter 7 bankruptcy their debt may be discharged in a few months instead of many years with a DMP program. About 70% of bankruptcy filers are under a Chapter 7 bankruptcy so that’s kind of a relevant point, wouldn’t you agree?

        If CCCS of the North Coast and your group want to come out of the closet and stand up against the creditors and renounce the ties that come with fair share funding I’ll gladly give you a platform to do that. I’ve said for quite some time I’m in favor of a strong debt relief industry that includes all options so a consumer can get the best and most appropriate help available to help remedy their situation.

        If you think debt settlement has been the cause of credit counseling brink of failure issue, you are entirely incorrect. There was a big flux of rouge debt settlement companies in 2007-2010 but the complaints and majority of advanced fee companies are gone now post TSR.  

        I stand behind my two fundamental issues that I identified that have led credit counseling down this long and avoidable path. See them in Credit Counseling Industry Indicted in Potential Historic Turning Point Lawsuit.

        And not to skip your question, of who invited me to the call, it was one of your members that asked me to attend, but I’m sure they will deny it publicly. But ask yourself, if I wasn’t invited, how would I have had the number and access code? Did I find it blowing in the wind on a piece of paper along a back road?

        One last point, I’m curious, how many consumers have you assisted to settle their debt when they could not afford a DMP?

      • http://twitter.com/fraudsniffer CMS

        I love how people focus on “you accessed our conference call illegally” and “you spent too much money building an office” and “you guys are racist” and “CMS is stupid for trying to help people get refunds” 

        When will everyone understand that by being so much against public awareness you are shooting yourself in the foot. If you have a point that will clarify something, share it. Impugning the quality of a public awareness blog simply shows you are not in the business for the right reasons. 

        I have blasted statements, listened to responses and been corrected many times.

      • http://GetOutOfDebt.org Steve Rhode

        I think you might have missed the ultimate irony.

        So the only time debt relief companies participate on the site is actually to NOT help answer reader questions, educate and share their expertise to help people, but to complain that something has been exposed.

      • http://twitter.com/fraudsniffer CMS

        This town needs an enema!

  • http://www.zipdebt.com Charles Phelan

    Thanks for the report, Steve. Very sobering indeed. Unfortunately, it’s still unusual to see anyone associated with the world of credit counseling (i.e., non-profit DMP providers) speak in positive terms about debt settlement. Their attitude makes no sense though. I’ve never understood why CCC executives seem totally unable to distinguish between settlement as a *method of debt resolution* and justifiable complaints about shoddy business practices by *debt settlement service providers*. It’s like saying that credit counseling itself is a bogus approach just because Ameridebt got shut down by regulators.

    Incredibly, the entire DMP industry does not seem to understand that they are “sleeping with the enemy.” Equally incredibly, they seem not to get that giving up the dwindling
    fair share ball-and-chain will free them to take advantage of new and
    legitimate stream of revenue. It’s legit because it’s the *banks* that want to settle in the first place! Otherwise there would not
    even be a settlement industry at all. But whether or not an industry exists to serve the need, settlement as a
    financial practice is not going away anytime soon. The
    decision to settle is a straightforward financial analysis involving
    concepts like present value of money and aggregate collection
    recoveries. It’s a bald fact that virtually all major creditors have standing *settlement departments*, where they routinely cut deals with their own clients. Some of the largest issuers even mail out settlement offers to customers on a timed basis as the account ages toward charge-off. If settlement of credit card accounts is an evil business practice, then the DMP providers have only their own masters to blame.

    • Angelo

      Harrumph…Harrumph !!  Well said Charles….the funny (sad and hypocritical actually) is that MOST non profit out there have an arrangement with or secretly own a settlement company.  I have visited quite a few non profits and I couldn’t help but notice that there always seems to be a debt settlement company located in the same building….coincidence?  They publicly bash settlement but behind the scenes are profiting from consumers who cannot afford the payments in a DM plan.

      Let me be clear that I am not bashing non profits or DMP’s, there is an absolute need for the service, just like there’s a need for settlement and a need for bankruptcy.  What I am bashing is that instead of recognizing the need and educating the public on the available options they put their tail between their legs and say nothing……..skirts!

      • http://www.zipdebt.com Charles Phelan

        Yes, if it’s really all about the consumer (as it should be) then all options should be on the table for discussion. I get that the DMP providers are afraid of losing fair share, but I don’t understand why the industry hasn’t been more vocal about doing settlements when it’s the banks doing the settling in the first place. I mean, how difficult could it be for a non-profit to establish a set of parameters based on suitability analysis? They could match up with what creditors’ internal guidelines dictate, etc. But as far as I can tell, those conversations aren’t even being broached.

      • http://northeast-properties.com Andy Faria

        The race should be on to develop a hybrid program. A true hybrid program would blow the doors off of ANY DMP or DS program, and most likely put all the rest out of business. Helping consumers in the process.

        Screw suitability testing to determine either/or, build a better mouse trap that suits all.

      • http://www.zipdebt.com Charles Phelan

        I agree it sounds great in theory, but the trick to it will be getting Creditor A to accept a settlement while Creditor B and C are getting paid monthly. I’m not saying it can’t be done, only that it’s not as straightforward as it looks at first glance. A great deal would depend on the mix of creditors and account balances, etc.

      • http://northeast-properties.com Andy Faria

        Charles, the other side to that is that it would probably improve DMP offers from creditors, and they would also be likely become more lenient with DMP defaults, once the creditors learn what is next.

        I agree though, it’s like asking for and expecting world peace. CCA’s will never get off the fair share, and the DSC’s won’t want to fill out all the paperwork. Utopia is nowhere in sight. 

      • Nancybaker78

        A Hybrid solution is so often talked about…I hope the industry does take a large jump in that direction, the tools are in place…also let’s not forget about the “fiduciary duty” the debt relief advisor has to advise his/her clients of all possible solutions regarding a very personal and sensitive issue – their overwhelming debt!

      • Michael

        I agree. The fiduciary aspect of anyone advising about debt relief can be applied
        across every product, no matter the flavor or tax status of the provider.

        I have been actively involved in a project that meets necessary criteria for bona fide non profits to better serve the consumers they connect with who are struggling to meet their monthly financial obligations.

        Nonprofit CCA’s are well positioned to provide an alternative to consumers who are not able to meet creditor criteria for a DMP, but who may be suited to avoid bankruptcy.

        I will be participating at an industry conference later this month where I will touch on parts of the project publicly for the first time.

  • http://www.zipdebt.com Charles Phelan

    Thanks for the report, Steve. Very sobering indeed. Unfortunately, it’s still unusual to see anyone associated with the world of credit counseling (i.e., non-profit DMP providers) speak in positive terms about debt settlement. Their attitude makes no sense though. I’ve never understood why CCC executives seem totally unable to distinguish between settlement as a *method of debt resolution* and justifiable complaints about shoddy business practices by *debt settlement service providers*. It’s like saying that credit counseling itself is a bogus approach just because Ameridebt got shut down by regulators.

    Incredibly, the entire DMP industry does not seem to understand that they are “sleeping with the enemy.” Equally incredibly, they seem not to get that giving up the dwindling
    fair share ball-and-chain will free them to take advantage of new and
    legitimate stream of revenue. It’s legit because it’s the *banks* that want to settle in the first place! Otherwise there would not
    even be a settlement industry at all. But whether or not an industry exists to serve the need, settlement as a
    financial practice is not going away anytime soon. The
    decision to settle is a straightforward financial analysis involving
    concepts like present value of money and aggregate collection
    recoveries. It’s a bald fact that virtually all major creditors have standing *settlement departments*, where they routinely cut deals with their own clients. Some of the largest issuers even mail out settlement offers to customers on a timed basis as the account ages toward charge-off. If settlement of credit card accounts is an evil business practice, then the DMP providers have only their own masters to blame.

Get My FREE Get Out of Debt Guy Newsletter

It is the smart thing to do.

I promise to keep your email safe and secure.

Close

I want to keep you posted each weekday with just one email about the latest get out of debt news, scam alerts and information to beat back debt.

You can unsubscribe at any time with just one click.

After you subscribe, check your email to confirm your subscription. If the confirmation email does not appear in your inbox in a few minutes, check your spam folder for it. Sometimes it likes to annoyingly hide there.


  • It will keep you posted on the latest scams.
  • You will be alerted to the latest articles.
  • You will wind up smarter than everyone else dealing with debt.