Debt Relief Industry

Is The Less Than Full Balance Approach By Credit Counseling Already Doomed to Fail

A tipster (send in your tips here) point out to me a recent post by Harvey Warren who has been involved in marketing or promoting the Robert Manning program from the Responsible Debt Relief Institute and Hope Financial USA.

In the posting here, Warren states:

Now, here’s the most amazing part in Utah. AAA Fair Credit Foundation announced last year (February 17, 2010) that their legitimate non profit credit counseling agency was embarking on a radical new program offering less than full balance services through credit counseling. These services, prior to their announcement last year, were only available from bankruptcy attorneys or scandalous debt settlement companies. Great, you might think, finally I can get debt help from a credit counseling agency and be safe from debt settlement companies. But wait a second, the banks are treating the credit counseling agencies, their trusted colleagues, like criminal debt settlement companies and resisting this desperately needed service expansion. Why?

Both Bank of America and JP Morgan Chase are trying to scuttle this consumer assistance movement for the same reason they invented MERS, they have no regard for consumer rights and will take any means necessary to maximize profits including denying consumers access to desperately needed financial services information. They want amateur consumers to have no chance against their professional collectors. Uninformed and unsupported consumers are road kill for any collection department.

Several credit counseling agencies that take servicing the community seriously, are resisting the interference of Bank of America in particular at the peril of their funding and standing.

Some within credit counseling see the development of less than full balance operations as a challenge that banking will never tolerate. Others see the development of those same services as the only chance the credit counseling industry has to survive during the current economic calamity. Simply, 80% of consumers seeking service from legitimate credit counseling cannot benefit from their traditional services.Source

Credit counseling groups have struggled to put forward the Less Than Full Balance (LTFB) program now for a number of years and creditors have fought back. But at the same time, and for every single day creditors have fought against credit counseling doing this, debt settlement companies have been actually settling debt. Interesting huh?

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The credit counseling groups face a very difficult issue here. On one hand they are public charities that are formed to serve a disadvantaged class of people with education and some assistance. So how can they claim to serve those people in a fair role when they don’t offer debt settlement as a solution when it is appropriate, if as Warren says, 80% of people are not served by the solution they offer?

Maybe the way forward is not to negotiate with the creditors for years on a LTFB approach and instead to just start settling the debt for appropriate consumers who would otherwise not have enrolled in a DMP. It can be done and the path forward is clear and apparent.

Sincerly,
Steve

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About the author

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.

2 Comments

  • The problem with the less than full balance program is that it’s a hush hush way to say debt settlement and there’s no issue with that as long as a level playing field is created and everyone plays by the same rules which means full disclosure of all risks, fair share disclosure, standardized reporting and should not be exempt from the upfront fee bans.  Sorry guys, cant have your cake and eat it too!  Then there’s the ethical issue of accepting a 60% settlement…oh, sorry…60% less than full balance offer when a majority of accounts are settled in the 30% range.  Really?  Cant claim you are acting in the best interest of the consumer when these types of programs clearly favor the creditors.  The banks not going for it just shows their institutional stupidity, corporate greed, control of the industry and complete disregard for consumers.

  • The problem with the less than full balance program is that it’s a hush hush way to say debt settlement and there’s no issue with that as long as a level playing field is created and everyone plays by the same rules which means full disclosure of all risks, fair share disclosure, standardized reporting and should not be exempt from the upfront fee bans.  Sorry guys, cant have your cake and eat it too!  Then there’s the ethical issue of accepting a 60% settlement…oh, sorry…60% less than full balance offer when a majority of accounts are settled in the 30% range.  Really?  Cant claim you are acting in the best interest of the consumer when these types of programs clearly favor the creditors.  The banks not going for it just shows their institutional stupidity, corporate greed, control of the industry and complete disregard for consumers.  

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