A New Way out of Debt
In a growing number of cities, businessmen are getting together to offer a helping hand to those in financial hot water.
Condensed from Empire: Murray Teigh Bloom
In the fall of 1960 the world seemed about to collapse around Billy and Marilyn Simmons of Phoenix, Ariz., and their two children. Hounded by bill collectors from 25 different creditors, 38-year-old Billy was dreading the moment when he would be fired from his job as a salesman. One of his creditors had served a wage attachment on Billy’s $365 monthly salary, and his boss didn’t like wage attachments. Marilyn was still recovering from accident injuries and spent most of the day not answering the door or the phone.
At home each night Billy and Marilyn resumed their long, bitter argument as to whose fault their $2261 of indebtedness really was. When they tired of this they talked about going to voluntary bankruptcy, as 140,000 other American families do each year. They had tried valiantly to get their creditors to wait for money, but had been dismally unsuccessful. They had considered going to a commercial debt adjuster, but they found that it would cost them several hundred dollars and that it might get them further into debt.
“Neither of us said it, but both of us were thinking of the three D’s: debts, disagreements and divorce,” the Simmonses recalled recently. “Debt had toppled over a lot of other families and unless we found a way out….”
Then one day a creditor suggested a way– The Family Debt Counselors of Phoenix, a nonprofit community organization designed to help debt-entangled families. The Simmonses made an appointment with one of the many volunteer counselors who give several hours a month to FDC– most are credit experts or managers of small-loan companies. He explained the basic conditions each family must agree to before their case is accepted:
You are the only ones who can get yourselves out of debt. We can help lay out a plan for you, but you must pay your own way. It will not be quick or easy. Getting out of debt means a long, hard grind.
You must be willing to make some changes. It may even be necessary to accept a new viewpoint on what is “convenient” or “nice to have” and what is a real necessity.
You must keep your word with us. While we can usually get the cooperation of creditors toward reducing monthly payments, they all want assurance that an agreed-to plan will be carried out.
The Simmonses quickly okayed these terms, then asked, “What’s the catch? How much is this going to cost us?” After they had listed all their debts and monthly expenses, the FDC counselor told them that there would be an initial $5 charge to cover the expense of distributing to each creditor a schedule of their obligations, income and expenses, plus a $2 a month thereafter to pay for postage, and the checks and reports to their creditors. He explained that the low price of the FDC plan was made possible through the financial support (some $26,000 a year) of small-loan companies, banks, unions, and credit extenders such as department stores and doctors.
The experienced FDC counselor worked out a tight budget for the Simmonses. At first, they were allowed only $12.50 a week for groceries and all incidentals.
“When you’re forced to weigh every item,” Marilyn Simmons told me, “you suddenly discover you can do without a lot. I found that I was spending $88 a year on my Friday nights with the bowling league. So I quit, and right there we had an extra $1.70 a week. I learned a hundred new ways to cook hamburger and macaroni and cheese. We cut out movies completely and used the public library a lot.”
The Simmonses soon noticed that collector harassment stopped almost magically when creditors learned the family was working with the FDC. As the tension eased, they found peace returning to their home. “I realized that much of our money trouble had been my fault because I was too easygoing about buying things we didn’t need,” Marilyn admitted.
Every Friday when Billy Simmons got his paycheck, he would go to the FDC office and, as part of a self-teaching program, make out checks and envelopes to each of his creditors. When Marilyn was able to go back to work– as a lab technician making $91 a week– The Simmonses began to save money regularly, in addition to paying off their debt at an accelerated rate.
“We became bargain-conscious about everything,” they told me. “When a freezer-food-plan salesman came around, we flatly turned down his $800 deal. In the old days we would have been pushovers. Instead, we looked around and found that an acquaintance who handles property damaged in transit could get us a 20-cubic-foot freezer for $50 because it had been badly scratched in the freight-car. When we needed a new couch, we shunned installment stores. Someone we knew was moving, and we were able to get a perfectly good used couch for $25.”
By the end of 1963 the SImmonses had fully cleared up all their debts and were saving $20 a week. “Even better,” Marilyn told me, “we’re living on Billy’s salary alone, so that if I get sick or something happens to my job we’ll still be able to get along.”
Since the Family Debt Counselors was started in 1958, it has helped nearly 1000 Phoenix families to extricate themselves from debt entanglement. Richard K. Steinman, a founder and director, believes the organization has saved possibly 500 of these families from bankruptcy. In addition, in the past three years FDC has distributed $1,643,000 of clients’ money to their creditors. Normally, most of this money would have gone down the bankruptcy drain.
It was Steinman, who heads a local chain of small-loan companies, with other members of a committee from the Arizona Consumer Loan and Finance Association (which put up $500) who started FDC. At first, they encountered considerable resistance. “Everyone agreed we had a serious problem with our rising personal bankruptcy figures,” Steinman says, “but few could agree on a solution and even fewer were willing to pay for it.” However, they won the support of the Legal Aid Society, the Family Service Association (a social-welfare group), banks, and the AFL-CIO Central Labor Council, which contributed $1500, and FDC was launched.
“At first I thought we should have a free service,” Steinman says, “but people experienced in social-service work urged that we charge a small fee. By doing so, they pointed out, we would enable people to retain their self-respect.”
“There’s a tremendous need for this agency,” says Bernard Wielewinski, executive director of the Phoenix Family Service. “In fact, any good-sized American city needs an FDC. We know that emotional reasons often drive a family into great debt. A family agency like ours can help solve the emotional problems, but the debt itself can be resolved only by an intelligent, community-minded outfit such as the FDC.”
Even older than the Phoenix FDC is the Economy Budget Service of Columbus, Ohio. Begun in 1955, this service is financed at a $15,000 annual cost on a no-profit, no-charge basis by the Capital Finance Corp., an operator of small-loan companies. More than 400 families have been successfully helped from debt with personal bankruptcies avoided.
Drawing on the experience of the Phoenix and Columbus setups, similar services have been established in Salt Lake City, in both Kansas cities, and in South Bend, Ind. Before the end of 1964 the list will include Indianapolis, San Diego, Denver, Cleveland, Charleston, W. Va., Atlanta and Flint, Mich. By the end of 1965 some 80 other communities will probably have similar programs, thanks to the free services offered by the Consumer Credit Counseling Service Committee of the National Foundation for Consumer Credit in Washington, D.C.*
“It’s a marvelous bargain for the entire community,” says Lloyd Waterson, secretary-treasurer of the Credit Bureau of South Bend and one of the prime movers in getting that city to set up its Consumer Credit Counseling Service. “When we learned that nearly half of the personal-bankruptcy filings here were for less than $2000 and that many were under $1000, our merchants were quick to see how such a program could help restore the community’s good financial health. No family wants to go into bankruptcy. They’re forced into it because the business community simply isn’t paying enough attention to their desperate plight”
Easy-to-get credit has helped millions of people to obtain the amenities of life. Usually it works out well for all concerned. But in a minority of cases, families don’t realize that they are overextending their resources until it is too late. That is why business and financial groups are now trying to help them out of their unforeseen troubles.
The Consumer Credit Counseling Service Committee puts it this way: “Private enterprise has a responsibility beyond offering credit to the public at a reasonable charge. The credit facility was designed by businessmen. It is up to them to see that people are not caught in a trap of debt as they use this system of buying and borrowing. They must offer a helping hand when the chips are down.”
*Any community group that wants to set up such a program can get a free kit of plans, working suggestions and forms from the National Foundation for Consumer Credit. 1411 K St., N.W., Washington, D.C. 20005.
Reader’s Diagest Volume 85. August, 1964