A reader asked me to take another look at trending in the credit counseling industry. Shocking sight.
I’m afraid things are not looking up.
If the trend of years past was still relevant we would expect to see a big post holiday season spike in consumer interest in credit counseling. But we didn’t see on last year and as of now it appears to be MIA this year as well.
I’m afraid that after looking at current data my opinion is the same as it was in January 2011 when I wrote “Dear Credit Counseling, Times Only to Get Tougher.”
As I said then:
While credit counseling has been judgmental and acting as if they are superior to debt settlement and bankruptcy, the reality is, it is they that most need to change. But do they have the fortitude to make the hard choices and finally break the golden handcuffs of the creditors that control them? Frankly, I don’t think they do.
As long as the Chase Banks of this world dictate what credit counseling groups can say or do, they will never be free to stand up and truly fight for consumers.
Leadership in credit counseling needs to stop trying to point the finger of blame at everyone else and start to asses the fundamental breakage of the single source debt relief strategy of the debt management plan as their moneymaker.
As I previously said in February of 2011:
I project that debt relief providers in debt settlement and bankruptcy areas will continue to suffer from a declining demand until creditors begin to issue massive amounts of credit again. Without new credit to cause consumers to become over-indebted there is no stimulus to fuel demand for services.
On the credit counseling front, their demand for services continues a steady decline year on year. But that’s not a function of consumer demand. My opinions is it’s a direct function of the DMP product being broken which results in not providing many consumers with payment relief when they need it most. – Source
If we look at current consumer search volume in the United States from 2004 through the middle of January, 2012 for “credit counseling” you can clearly see the despite all the efforts of credit counseling to wage war with other sectors of the debt relief space, the interest by consumers is continuing to shrink to new lows.
Even if we take a closer look at the last twelve months things don’t look positive.
And a more granular look at the last 30 days shows thing to be trending slightly down in the month that should be a boom.
I have no idea what the leadership in credit counseling believes and is promoting but my opinion is that drastic action needs to be taken. I fear it won’t be.
So what we are left with are employees of credit counseling groups that desperately want to do the right thing for consumers, and can’t. Their hands are tied and I would bet that there is more and more focus on enrolling all the consumers possible in the debt management plans rather than providing the most appropriate solutions for the consumer in trouble. When times get tough the focus becomes the sale. It must be a frustrating and scary time, wondering if you will have a job if things continue. I imagine their are plenty of credit counseling offices today with a number of empty cubicles.
As long as the consumer pipeline of unsecured debt remains low and the outlook for the economy is subpar then consumer demand will be low for a single source solution. Add on top of that the fact that a credit counseling debt management plan does not provide consumers with a substantial enough payment break to give them breathing room in down times.
People inside the credit counseling industry are whispering they would like to expend their services to offer debt settlement solutions, when appropriate, but are being hamstrung by Chase Bank, and maybe others.
For all intents and purposes Chase Bank is controlling the credit counseling industry and the type of help these charitable nonprofit organizations can deliver. Creditors continue to drive down funding for credit counseling and demand continues to dry up.
For older credit counseling groups that have built their operations on good time budgets, these times must be extremely tough and for many groups they will be unsustainable.
The irony is that credit counseling has all the tools lying right there for them to become the unbeatable single source provider of debt relief help and monopolize the market for decades to come but they are apparently too afraid or blind to take action.
Additionally they made other resources and solutions the enemy in their excuse why their demand has been dwindling and now they choke on admitting they need to embrace debt settlement solutions if even in an educational way.
What boggles my mind is who in the world is sailing the credit counseling ship? Is anyone at the helm?
In 2012 I would expect to see
- the CFPB regulate nonprofit credit counseling under the same rules they will require of all debt relief providers;
- consumer demand lay flat or decrease a bit more for debt management plans;
- an accelerated consolidation or closing of some current credit counseling organizations; and,
- continued creditor control over the industry.
Anyone from credit counseling brave enough to anonymously comment if you agree or see things differently?
I can always use your help. If you have a tip or information you want to share, you can get it to me confidentially if you click here.