The other day I published the debt settlement recommendation report from The Center for Responsible Lending (CRL), click here.
As vocal as critics have been in attacking this site and myself for being outspoken about consumer unfriendly debt relief practices I felt certain people would have comments to offer about the CRL recommendations.
But silence, except for one commenter.
Some have asked me what my opinion is of the new suggestions, and while I did not offer them in reporting the CRL paper to give people a chance to share, I will now.
My opinion is the CRLreport is on target but does not go far enough. While the report is just about debt settlement I would like to see a much more comprehensive position by CRL about debt relief in general.
The same issues of appropriateness, screening, do no harm, detailed reporting, and fair and reasonable fees are not problems faced only by debt settlement alone and creating the impression only debt settlement is deficient in these areas would be a gross mistake.
These exact same issues are core deficiencies in credit counseling, student loans assistance, loan modification, and other non-legal services that intervene between a creditor and consumer.
Credit counseling seems to always get a pass because of their nonprofit foundation but aside from the Cambridge Credit Counseling transparency initiative nearly all nonprofit groups and the national NFCC have been silent on the exact same criticisms CRL leveled at debt settlement.
The CRL report does a really good job of pointing out the other considerations that should be part of any logical and healthy debt intervention strategy by all providers.
Currently, debt intervention providers (credit counseling, debt settlement, student loan assistance, mortgage modification, foreclosure assistance, etc.) all attempt to primarily do one thing, sell their widget rather than provide fair and balanced best advice based on the financial situation of the consumer and goals the consumer wants to achieve.
Despite of all of the venom, rage, anger, and attacks the debt settlement industry has leveled at myself and critics, the debt settlement industry as a whole has been ridiculously stupid and shortsighted in embracing healthy changes, such as those CRL recommended, to help preserve and grow their own industry.
Let’s not forget the predecessor of the American Fair Credit Council (AFCC), The Association of Settlement Companies (TASC) fought hard to ban seemingly all regulation of the industry, both federal and state. Debt settlement was against all regulations till they were for some.
It sure seemed like debt settlement associations and companies spent more to fight back than be fair and reasonable to consumers. The fighting and pushing simply resulted in a failed approach of eliminating all up-front fees when they could have easily had $400-$500 in up-front fees in the early suggested UDMSA approach.
While the AFCC made the right noises in the past couple of years about openness and transparency, it seems their members could not deliver on the promise according to the CRL report. And AFCC can only be as good as the membership companies want them to be.
The debt settlement industry got a black eye and severely discredited not because debt settlement isn’t appropriate for some but because profit takers and marketers tried to push it as a high commission solution where one size fit all. It never was and still isn’t.
I am not against debt settlement, never have been. As I said in my public testimony to the FTC, “A for-profit debt counseling or debt settlement industry in the U.S. would give consumers the opportunity to have groups want to move forward with new solutions, to lobby against creditor abuse, to fight for the consumers that are not well or properly served now, and to allow profit to attract the best and most talented staff.” – Source
And that profit was not intended to attract better salespeople but smarter advocates to fight for consumers. That simply has not happened.
Personally, I would love to see CRL create a paper that independently looked at the same issues and compare all debt relief options side-by-side to show results and effectiveness.
No one solution is going to tick the boxes for every consumer and credit counseling has been grossly inadequate in recognizing this. Generally critics have missed the mark on credit counseling as well. While some feel credit counseling does no harm since payments continue to be sent, I strongly disagree.
We have an exploding retirement crisis on our hands in America. The corrosive danger of enrolling someone in credit counseling who is not a best fit is not they will be sued but they will sacrifice a safe retirement. Don’t believe me? Read this.
For example, a consumer who would only qualify for a chapter 13 bankruptcy but has cash on hand to settle should first consider a debt settlement approach and not credit counseling. And on the flip side, a consumer who can make their minimum payments and afford to save money each month but wants to get out of debt with reduced interest rates should consider credit counseling over debt settlement.
And for consumers who don’t have enough emergency funds on hand, can’t save for retirement, and would qualify for a chapter 7 bankruptcy, they should first consider that solution above anything else.
So to my CRL friends I say, the report is awesome, but it’s only a start. I challenge you to deliver that comprehensive report and look at debt relief in general before it is too late for the entire debt relief industry to find a future.
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