Dear Credit Counselors, You Are Your Own Worst Enemy.

I’m frustrated.

For the life of me I can’t understand why credit counseling continues to look at debt settlement as the enemy. The anger and desire to kill the solution seems to be opposite of what a charitable industry should be trying to do.

The other day over a delicious Cracker Barrel lunch I was asked which side of the fence I’m on. The question really struck me. First, I didn’t realize I needed to be on one side or the other. Second, my allegiance is to the consumer, not the industry. I’m on the side of the consumer and that side should be all sides. We need to tear down that fence.

Granted, there were a lot of bad players in the debt settlement world that were charging consumers in advance and never delivering the services. The FTC Telemarketing Sales Rules put in place in 2010 went a long way towards clearing that out. And all that is left to deal with are the attorney model loophole groups that continue that effort. But action is in the works to deal with that. All eyes are on Illinois and the Attorney General suit against Legal Helpers Debt Resolution as a watershed case. It will just take some time.

But the more I hear the rustle of conversations from friends and contacts from the credit counseling world, the more I’m either angry or perplexed, I’m not sure which is the prevalent feeling yet. And the reason I’m feeling this way is because leaders in the credit counseling field are making moves and taking action that does not help consumers in the long run but instead cuts their own throats and restricts their chances to survive moving forward.

If we believe that credit counseling is a charitable field that should serve consumers and save those that need saving then how does one resolve the fundamental issue that while credit counseling wants to speak out against debt settlement, they do little to speak out about their own broken product, the debt management plan.

Credit counseling also does little to nothing to speak out about bad creditor practices. A true cynic might say that this lack of speaking out is subconsciously controlled by the fact the credit counseling pay comes from creditors. Having run a credit counseling agency myself I’d say the creditor funding absolutely hampers credit counseling charitable groups from doing the right thing.

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Ponder this, when was the last time the National Foundation for Credit Counseling (NFCC) came out proactively against creditor policies or spoke out about the fact the debt management plan does not provide enough relief for many consumers?

I took a look at the NFCC press releases and all I could find was that in May 2010 the NFCC came out in support of cutting debt settlement fees to 5% of debt. In May 2009 they published a release in support of Cuomo’s debt settlement investigation, and I couldn’t even spot a press release they put out support or pushing for the CARD act to protect consumers. There certainly wasn’t a release talking about how creditors cutting their funding and the damage that does to consumers.

Credit counseling does itself and the consumers they are created to serve a terrible disservice by continuing this us against them battle against debt settlement.

Credit counseling needs to open their eyes to see this field needs to change and in the world today, the responsibility is to provide consumers with best advice about ALL debt solutions and not just to drive people to DMPs.

I see a future where we stop talking about credit counseling and debt settlement and instead convert this industry into one called debt relief where both for profit and nonprofit providers exist.

For the sake of consumers that need good help they can trust, this needs to stop being a turf war as quickly as possible. Consumers need the best advice possible from all debt relief providers and not to be just sold the widget at hand on that side of the fence.

Modern debt relief consists of credit counseling, debt settlement, and bankruptcy. The nuanced variations include an understanding about chain of custody of old debt, statute of limitations and other underlying issues.

Debt settlement is an appropriate solution to use at times, just like credit counseling is, at times, but they are not mutually exclusive, they are each different tools that a skilled provider can use to BEST help the consumer.

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As credit counseling continues their attack on debt settlement you have to ask, can they really be that shortsighted? Can they really want to box themselves into a no-income corner at the same time they beg for more from the creditors? How can credit counseling leadership even think that’s a good idea. It makes no sense, it’s not logical, it’s like lining up the last nail to be driven.

I have to wonder, if NFCC isn’t taking the lead to push and fight for all solutions that are best for the consumer, their charitable class of members they serve, is there an undercurrent they serve the creditors first and distribute their wishes to member agencies?

And for those credit counselors that think killing off debt settlement creates a larger market share for your product, you are flat out dead wrong. The underlying issue with the debt management product is that it’s fundamentally broken and does not provide consumers with meaningful breathing room to financially recover in tough times. On top of that you need to understand dwindling enrollment is a function of the extended recession, not debt settlement at this point.

Dear credit counselors, it’s time to get real and look in a mirror if you want to survive. And if you want to talk about this then come to the July, 2011 free class in Raleigh and let’s take an honest look at the future.

The ball is in your court. Now is not the time to lose it over the fence. Now is the time to play it wisely.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.


Damon Day - Pro Debt Coach

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72 thoughts on “Dear Credit Counselors, You Are Your Own Worst Enemy.”

  1. DS is not fundamentally flawed anymore that CC is fundamentally flawed. It’s execution can be flawed, be it DS or CC, that’s for sure. The “fundamental flaw”, if any, occurs when only one option is offered to the client. Human nature is to sell your product, not the other guy’s. The fiduciary duty is very difficult to assess, let alone enforce. It seems the only way to rise above the accusation of violating this duty is to remove the financial motivation of offering one product over the other. It seems this is best acheived by offering all options, DC, DMP, or BK. Until this is done, even the most ethical CC or DS provider will be subject to the accusation of promoting its own interests over its client. In the meantime, debating legitimacy only works to the creditor benefit. We should be debating standards to qualify consumers for particular services.

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  2. In reply to James, yes rare cares when the client is already well past due meaning 6 months or more.

    And to all of you that work for DSC I find it insulting that you think I dont offer all the options to my clients. Because I’m sure you all recommend to your clients to enroll in a DMP “when its in the clients best interest.Yeah, and I’m Thomas Jefferson. Please!  The facts are the facts you represent a poor service that destroys clients credit bilkes thousands and thousands in fees and opens them up to lawsuit wage garnishment and income tax ramifications. Done Period! End of Discussion, you dont have answers to those facts

    So all of you can try to justify your existance by now trying to say well after 10/2010 we are all rehabilitated and we do it the right way and we explain it. Stop!

    The service is fundamentally flawed.

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  3. OK, so you know the fundamentals of DS and only in “rare cases” do you think it appropriate for your client. You mentioned in your earlier post the perhaps the status quo and the creditors don’t want non-profit CC”s involved in DS, is this a reason not to consider this option?  Do-It-Yourself DS is certainly not for everyone and you will “never ever refer a client to a DSC”, so I wonder if there might be some of your clients who sometimes aren’t getting the most complete picture of debt relief options available to them from you.

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