When Bad Debt Advice Hides Behind Good Advice

I just saw a Houston Texas TV story about Suzanne Black, an elderly 70 years old woman involved with a nonprofit debt management company, Money Management International. She paid $63,000 over the last five years with their help to get out of debt. While this may sound all fine and good on the surface, I cringed at the underlying message this report sent.

Nonprofit debt management companies offer a valuable service to many. However, their practices towards most seniors remind me of Han Christian Anderson’s fable, “The Emperors New Clothes.”

You probably remember the story. Swindlers posing as weavers offered to supply the Emperor with magnificent new clothes invisible to the stupid and incompetent. The Emperor hired them. Officials and the Emperor himself visited them at the loom. They saw nothing being made but pretended otherwise to avoid being seen as fools.

When the “new clothes” were finished, the swindlers “dressed” the Emperor. Naked, he set off on a procession through town. The townsfolk, not wanting to appear stupid, oohed and awed over the Emperor’s beautiful “new clothes.” Groupthink is very powerful. Finally, a little boy blurted out the truth, “Look! The Emperor has no clothes!” Unfortunately, most nonprofit debt management companies are like the swindlers who made the non-existent clothes when it comes to many seniors.

I am the Executive Director of HELPS, a national charitable nonprofit law firm that helps lower-income and poor seniors in all fifty states. Most seniors don’t understand that federal law protects their social security, pensions, disability, and VA benefits from debt collectors. This money is protected for seniors’ needs. It cannot be taken or garnished.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

Nonprofit debt management companies advertise free services or a minimal monthly fee to help people in debt. But what they don’t disclose is that they have a prearranged agreement with the credit card companies and other lenders on whose behalf they collect. They keep a certain percentage of the amount they collect, usually 15-20%, as a “donation” to their nonprofit entity. This is how they are supported financially. Unfortunately, their financial interest, the donations they receive when seniors enroll in their program conflict with their duty to advise a senior that their income is protected.

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Recently I spoke with Mary, a 74-year-old widow whose only income was $1,700 monthly Social Security. After $700 in rent, a $200 car payment, and a $300 debt management company payment, she was left in utter poverty. Yet when she enrolled in debt management, she was never told this simple fact, “Federal law protects your income; you don’t need to pay this debt.”

Most debt management companies withhold information about the protected nature of seniors’ income so that uninformed seniors will enroll in their services.

Like the groupthink among the townspeople in the fable, many respectable organizations like the AARP, even government agencies, regularly refer seniors to nonprofit debt management companies like Money Management International, perhaps thinking a nonprofit cannot harm.

However, withholding essential facts from a senior making a financial decision is fraud, plain and simple. HELPS believes that their fraudulent and deceptive practices need to be disclosed like the little boy in the fable.

Lower-income and poor seniors, some of the most vulnerable in our society, deserve to be given complete and accurate information regarding their protected income.

HELPS is a national 501 c nonprofit law firm. We represent seniors and disabled persons in all fifty states under the Fair Debt Collection Practices Act to stop unwanted collector contact. We also educate seniors and disabled persons on how to maintain their financial independence. Learn more about HELPS at www.helpsishere.org or call us toll-free at 855 HELPS-US. We turn no person away that needs the help we provide.

Eric Olsen, Executive Director HELPS Nonprofit Law Firm. HELPS assists seniors with debt.We protect seniors from unwanted debt collector contact. We also educate seniors about their financial rights, including how their Social Security and other retirement income are protected from collectors and available for their needs. We help many seniors who bank with a credit union, so we have seen firsthand the difficulties seniors face when their credit unions don’t follow the law. Learn more about HELPS at www.helpsishere.org or call HELPS toll-free at 855-435-7787.
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8 thoughts on “When Bad Debt Advice Hides Behind Good Advice”

  1. MMI has published the blog (including link to HELPS) on what it means to be judgement-proof and will disseminate it it to our clients who are opted-in to our newsletter. I have also created a pitch for our media contacts which includes this information, as I believe it is important for consumers to understand scenarios in which they may not have to repay unaffordable debt, including those who are eligible for hospital charity care, those with time-barred debts, and those who experience a loss of an indebted spouse not living in a community property state. If you can think of other scenarios, please let me know so I can include them.


  2. As both a former client and counselor, and current spokesperson at MMI, I would like to provide some feedback on your position.

    Comparing your clients to ours is apples and oranges. Our client was employed and repaid $63k while still taking vacations. Clearly not destitute nor judgment-proof.

    Clients who opt to stop paying debts, seek bankruptcy, or enter into debt settlement, do damage to their credit score. Our debt management plan clients, on average, increase their credit score by about 100 points from start to finish. We do all we can to help them avoid credit damage, but when unable to repay we refer them to seek legal advice.

    We are not attorneys and cannot provide legal advice. If a client is unable to afford repayment and we suspect they may be judgment-proof, we refer them to seek legal advice, including from legal aid nonprofits such as yours.

    Just because a consumer receives protected income doesn’t mean they cannot be sued, or a lien placed against property if they are a homeowner. The decision to default on a debt comes with consequences, including credit and legal, which should be carefully researched and considered.

    You fail to note the moral or religious codes many individuals have to repay their debts in full, even when they are informed they may be judgement-proof. As a counselor, I encountered this regularly. Counselors do not work on commission and do not have any personal interest in encouraging a client to enroll in debt management when they know the client cannot afford it. We do not want to see someone invest in an effort that will fail if they cannot afford basic living expenses and would never tell someone to prioritize unsecured debt above essential expenses.

    The creditor donations you reference, called “fair-share”, is closer to 5%, not 15-20% as it was years ago. As such, it now represents a much smaller portion of our operating budget, with grants (including HUD funding) representing a larger percentage. Our client disclosures include our funding sources.

    It is unfortunate that you feel the need to criticize another agency helping consumers overcome financial challenges as you simultaneously promote your own. MMI served nearly 200k households last year and helped consumers repay nearly $300m in debt. On average, we reduced their interest rates from 24% to less than 7% and helped them become debt-free in 45 months, shaving years off repayment and saving thousands in interest.

    I would invite you to read their feedback online, as thousands have reviewed us with high praise across multiple channels.

    • The person MMI helped obviously had higher income. And it may have been right for that person but what about the nearly half of seniors who have incomes with 200% of the poverty line. The point is that debt management companies do not as a rule advise seniors that their income is protected. They sign up many seniors who are lower-income or poor. We talk to these seniors every day. These companies will explain that they don’t tell seniors their income is protected because that is “legal advice.”
      They hide behind that to withhold telling seniors the truth about their income. I agree that these companies do good work in many cases but not the case when it comes to seniors. Whether it’s 5% or whatever it still is a conflict of interest that isn’t disclosed. You make my point, everyone praises these companies but don’t realize that when it comes to seniors they wolves in sheep clothing. I know I talk with these senors every day. Eric HELPS Nonprofit Law Firm

    • Your reply proves my point. Some debt management companies are like the good neighbor everyone likes. He helps people up and down the street. Like all the people you talk about praising your services. He is well thought of but then he visits the poor widow down the street. She invites him in and while she is making him a cup of tea he steals money out of her purse. When she goes to the drug store to buy her medicine she finds her money missing. Because he is nice to many he is still nothing but a thief because he steals from the widows.

      As I said most debt management companies don’t disclose their conflict of interest. When you are a lower-income or poor senior with barely enough to live on credit loses its meaning. Debt management companies sometimes say they can’t tell people their income is protected because saying such would be giving “legal advice.” When in fact it is the most basic piece of legal information lower-income and poor seniors who owe debt need to know. Why not tell the truth?

      Sure the lady in the article may have made good use of your services. That is why I cringed when I read the article. It furthers the deception. What about the thousands of other lower-income and poor seniors going without basic needs making payments to debt management companies? I believe a recent report from MMI showed that a third of your clients were seniors. I gag when I read the invocation of “moral or religious codes.” Does that justify financial fraud plain and simple? Telling seniors the complete truth would make a big impact on your business.

      I have no argument with the good debt management companies do. That doesn’t justify harming the most vulnerable in our society- lower-income and poor seniors. Like the townspeople in the fable finally realized the Emperor had no clothes someday the public will learn the truth about these fraudulent practices. Mark my words.

      • I take your accusations very seriously have taken the following actions:

        I mentioned your points during another media interview last week. The station choose not to include what I had to say about those who may be judgement-proof in the final cut, but they did include some of the conversation regarding our funding sources. https://www.ktnv.com/news/getting-out-of-debt-red-flags-to-avoid-when-looking-for-help

        I have asked our content team to create a blog on the subject of what it means to be judgement-proof for distribution on our website and to all our current debt management plan clients who are opted-in to our newsletter. If you have content we can reference demonstrating your expertise in this area, feel free to share with me for possible inclusion of quotes and backlink to your website. thomas@moneymanagement.org

        I have asked our training team to distribute a refresher course to our counselors regarding appropriate client referrals to legal advice when we suspect they may be judgement-proof. If you are interested in receiving referrals, and if your nonprofit is not already listed, you might consider contacting SpringFour as they provide the referral tools for some of the largest nonprofit credit counseling agencies, including MMI. https://springfour.com/


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