As modern and clever as we might feel here on the bleeding edge of history there is one cold hard fact I can’t ignore, these are still the dark ages of the debt relief industry.
Let’s just take a broad look at the current state of affairs:
Nonprofit Credit Counselors: The credit counseling world is as tied to creditors and their wishes today than it ever has been. Creditors pull their strings and call the shots. While credit counselors want to talk about being the “white knight” of the debt relief world they aren’t. Saying it over and over doesn’t make it true. They don’t have the ability to stand up and offer consumers all of their options when dealing with debt.
And credit counseling is trying to fight the new financial watchdog, the CFPB, against supervision and regulation when they are the very charities that are supposed to be defending consumers and protecting them. Ironic huh?
Credit counseling needs to evolve to a point they can become a one-stop resource for all debt relief options. They need to break the golden handcuffs of creditors and stop living in fear of what their credit card bank masters think. They need to stand up and be their own mission, of charitably representing consumers in times of financial struggle.
I’ve watched a number of good credit counseling companies walk to the edge of breaking out but the fairshare drug is just too powerful. Until several are ready to stand together, every one of them is going to continue to die this slow death we are witnessing.
Some credit counseling groups have been exploring a offering debt settlement as a solution to consumers. Even a hybrid approach where a debt or two is settled and the rest are put on a debt management plan. That’s just a logical and clever solution to assist the consumers that want to avoid bankruptcy that they currently turn away. But they can’t. They are afraid because the creditors have told them to back away. “Yes, master.”
You want to see some massive radical change in the way consumers deal with debt? Well, if the nonprofit credit counseling industry just had the balls to stand as a group against creditor control they could radically and fundamentally create fairness and better help for people with bad debt. Until that day, the credit counseling industry is mostly a puppet of the creditors and they live in fear of being found out.
When I talk to credit counseling executives and the conversation comes around to what does the future hold and how can they increase revenue I usually say the opportunities are wide open but I ask one question, “Who do you serve, the creditor or the consumer?” And the typical response, “Yea, good point.” It doesn’t matter what opportunities and possibilities exist if we can’t deal with that elephant in the room.
Tools like the debt management plan offered by credit counseling can be a good tool when used in the right situation. But it’s not a be all and end all solution. It should be an arrow in the quiver like debt settlement, debt consolidation, bankruptcy, or even a simple accelerated payment plan. Credit counselors need to actually do their name and counsel people about credit and debt. Right now the name should be changed to something like “creditor agents.”
For those in the credit counseling world right now that might be reading this, I know my criticism stings, but you know I’m right about this.
Essentially nonprofit credit counselors today are a grocery store that only sells apples.
Debt Settlement Companies: The debt settlement world has been rocked with the Federal Trade Commission TSR rules that passed in 2010 and now prevent advanced fee before the service is delivered. Many providers have gone bust as a result. The TSR rules helped to get debt settlement companies back on track of offering a fairer service and then getting paid for that service.
But the debt settlement industry was their own worst enemy in all of the changes that led to the eventual new rules. Rather than put consumers first, the wave of opportunistic debt settlement providers put profits first. They fought back against every logical regulation and protection for consumers and instead of getting more, they got less and less.
But the debt settlement industry looks like they are starting to get things aligned better. The FTC rules pushed that fundamental change. Debt settlement groups today are more likely to do a complete assessment of a debtor’s situation and present all the options, even credit counseling. Certainly more times a day than a credit counseling group would mention debt settlement.
And debt settlement groups are most likely going to be for registration with the CFPB and are standing prouder as a result of all of the changes in the past year.
Slowly debt settlement providers are creeping towards becoming the primary debt relief providers that asses a situation and signpost consumers towards other solutions in a fair and reasonable way.
There are still a lot of groups that get it wrong and don’t do this yet but I see more signs of debt settlement groups expanding this way than I do of nonprofit credit counselors becoming better. Debt settlement groups are not under the thumb of creditors like credit counseling groups just are and they have more potential authority to tell consumers they way it is, rather than just sell them an apple.
The Poor Consumer: What we are left with are consumers in trouble who are searching for solutions from a provider they can trust to tell them the truth instead of just selling their widget. There are some companies now that do this but they are few and far between. It’s not a perfect or modern world yet in debt relief yet. Not even close.
Until the day comes where we can tear down the artificial borders of fragmented debt help providers and we can create centers of comprehensive debt help, the individual consumer is going to suffer. And suffering doesn’t mean they bought a bad bagel cut wrong, it means they were steered to the wrong solution and that altered the path of their life in a bad way.
I’d love to see a day when the debt relief motto is do no harm but for debt relief providers today I’d just be happy with do less harm. Please.
These truly are still the dark ages. Let’s storm the castle.
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