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What Debt Relief Companies Get Horribly Wrong When Helping Seniors

Almost half of seniors have incomes within 200% of the poverty line. They are classified as economically vulnerable and retire owing more debt than ever before. It is natural then that seniors with financial problems would search for someone to help them. Before the internet, communities had a local Consumer Credit Counseling Agency that would offer help to persons struggling with debt. The internet changed everything and allowed many nonprofit organizations to form that advertise debt management services that local Consumer Credit offered.

Probably the largest nonprofit debt management company stated in their 2019 report that 37% of the persons they helped were seniors close to retirement or retired.

Debt management companies advertise their charitable nonprofit status. This company listed its significant donors in the same report, including virtually every major bank credit card company, with many contributing over a million dollars. One can assume that other nonprofit debt management companies have a similar percentage of seniors they help.

Exactly how then are these million-dollar donations made? Nonprofit debt management companies have prearranged agreements with the banks and lenders on whose behalf they collect to set off a certain percentage of whatever a person pays them as part of a debt management plan as a preapproved donation by the bank.

Because they are charities, government agencies, and other organizations that help seniors often recommend nonprofit debt management for seniors seeking help with debt.

So what do I wish these nonprofit debt management companies would tell seniors? First, federal law protects Social Security, pensions, disability, and VA income. This money can’t be garnished or taken from seniors. It is available for their food, medicine, housing, and other basic needs. It doesn’t need to be used to pay an old debt, especially debt a senior can’t afford.

Why don’t many charitable nonprofit debt management companies tell seniors this basic fact? It’s certainly not legal advice like they might claim. It is simply fundamental law-federal law protects Social Security and pensions from debt collectors.

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But if a debt management company told seniors that their income was safe and didn’t need to be used to pay an old debt, they might not enroll in debt management. With over one-third of their clients being seniors, their income could be reduced dramatically.

This leads to the second thing I wish debt management companies would tell seniors. They have a prearranged agreement with the banks on whose behalf they collect to take a certain percentage of whatever they collect as a pre-agreed donation from the bank. But telling a senior about their prearranged donation agreement would reveal their conflict of interest. Especially if a senior understood their Social Security and retirement income was protected. Many have decided to say nothing.

As a result, I have talked to far too many widows placed in utter poverty making an unnecessary payment to a nonprofit debt management company.

I have hope that debt management companies will change their practice. But at present, I wonder how many who put their profits ahead of their mission statements can sleep at night.

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.

1 thought on “What Debt Relief Companies Get Horribly Wrong When Helping Seniors”

  1. I thought about filing bankruptcy but I tell myself if I had the money to pay for that I’d pay a few bills off. I’m 72 on widow’s benefits and am thinking seriously just not paying the credit cards. It’s gotten to the point where if I need something extra during any month I have to use a credit card and THAT defeats the purpose of continuing to pay the cards.

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