In a previous article published on the GOOD site, I asked the question: Is the debt relief delivery system broken? The article outlined the statistical failings of different options consumers seek in order to get relief from debt they can no longer afford. I also identified several reasons for the shortcomings and encouraged industry participants to share ideas for how to overcome them. The feedback and suggestions from readers in the comments were helpful. They boiled down to:
- Better and more complete training of the debt relief services industry personnel.
- Improved sales and screening and placement of consumers into the respective options suited to them.
- Better cooperation and relationship building between different service providers.
- Changing the compensation structure of sales and intake employees so that wages are not tied to customer conversions.
That last item inspired a standalone article about compensation.
All of the feedback and suggestions are good. Some companies already do well in these suggested areas, but may find it necessary to improve sales and screening, or will work to improve cooperation, or seek out and establish solid relationships with industry partners.
What follows are some of my ideas:
General practice attorneys, and most especially attorneys practicing consumer law (bankruptcy, consumer protection), should look to serve their local markets in settling debts. Virtually all professional industries have been impacted by the downturn in the economy, including the legal profession. Debt settlement is not a difficult service to introduce into a law practice.
- This in no way should be read as me advocating loopholes for charging advance fees for a direct debt settlement service. There are enough legal models doing so now…. I am suggesting attorneys serve their states residents through a bona fide attorney client relationship AND charge only affordable success fees. The revenue from doing so with clients who have a shot at avoiding bankruptcy will often exceed the fees generated with bankruptcy representation.
Nonprofit credit counselors should be offering debt settlement education AND direct debt settlement services. Adding the debt settlement tool and offering the education and support to consumers who cannot qualify for a proposal to be submitted to creditors for a DMP would replace fair share and grant revenue. I am not speculating on this fact. I have the data that proves it.
- CCA’s need to make changes and commit to serving consumer interests first.
- State and federal law supports CCA’s offering settlement education and services.
- Nonprofit tax status supports CCA’s embracing more of their education requirements.
- CFPB will no doubt propose a definition for larger participants in the non bank sector that will include nonprofit CCA’s that will later hold them to TSR standards for direct debt settlement services – more on that later.
- CCA’s will need to embark on a MAJOR counselor training effort when offering a settlement tool. First to dispel the contempt for the option that has been instilled and second in order to become proficient.
Debt settlement service providers working with business models of the past have closed and will continue to die off. Those willing to embrace changes to how they operate and willing to reduce their fees will be better positioned to survive and compete with CCA’s and attorneys entering the space.
- Settlement companies could form relationships with CCA’s by contracting with experienced negotiators to deliver back end settlement functions.
A better and less expensive technology can be introduced that allows settlements to be accomplished with issuers, assignees and purchasers that will enhance efficiencies, lower costs for all (most especially consumers), and allow for auditing, tracking and monitoring.
Consumers need to become more aware and better informed. Learning the details of legitimate debt intervention services as applied to their own unique set of circumstances and goals is the number one way to increase success rates and reduce the amount of time and resources that get wasted each year throughout the debt relief industry. More companies can/should/will embrace a consumer-centric educational focus that provides people the tools they need. This will create an environment where consumers become less reliant on direct services; are encouraged to have a more active and responsible role in their own debt relief decisions; participate in their own positive results; and apply financial fitness tools moving forward in their life when no longer overburdened by unmanageable debt.
Last year I committed to a project that embraces much of what is outlined above. The idea was to open up settlement to the nonprofit space while meeting the educational mandate of their tax status and to provide them with an additional tool to assist consumers. I have done that. The system is plug and play. Any CCA who would like to learn more is welcome to contact me at 208-265-8884. The opportunity for you to serve 2 or more times the people you currently are able to should provide great opportunity whether you are a small regional or national organization.
What was originally designed for implementation by nonprofit DMP providers will also be available to for profit debt relief companies as well as anyone who is interested in being of maximum benefit to consumers struggling with debt. I welcome all inquiries regardless of tax status.
This project embraces many attributes from my company’s business model for assisting consumers since 2006. Shortly, CRN will be making changes that incorporate much of the project design – more on that next week.Ideas for Creating Better Debt Relief Products, Services and Delivery by Michael Bovee