Quick Answer: Credit counseling agency ratings don’t reflect the industry’s financial reality, as major agencies like CredAbility and InCharge have undergone mergers and cut workforce by nearly half due to plummeting demand. These non-profit agencies are now scrambling to find new revenue streams through student loan services and retirement planning programs.
Richard Burnett of the Orlando Sentinel recently wrote an interesting piece about the realities of modern non-profit credit counseling and how they need help.
With demand dropping, existing credit counseling agencies are scrambling to find new avenues of income. Credit counseling agencies are turning to trying to sell student loan assistance and one agency reports having a pilot program to help the Hispanic community deal with saving for retirement and college costs.
It’s not like the tea leaves have not been apparent for the last few years. See this and this. Readers of this site should not be surprised by these consolidations at all. The only thing that is surprising is how the credit counseling industry didn’t. Instead they blamed all their woes on their perceived nemesis the “evil debt settlement industry” and did what they could to eliminate them.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
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The full article by Burnett is worth reading, here.
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Here are some highlights from it.
“Facing multimillion-dollar losses, the CredAbility credit-counseling agency pared its Orlando staff and laid off its top local executive last fall as part of a companywide downsizing. In early January, Atlanta-based CredAbility was absorbed in a merger with a large Virginia agency called ClearPoint.
Another big name in credit counseling – InCharge Debt Solutions of Orlando – has cut its workforce nearly in half in recent years as net revenues have plummeted amid an industrywide decline in the number of people seeking help.”
“Clearly, the industry is consolidating,” said George J. Janas, president of Winter Park-based Consumer Debt Counselors Inc. “And everybody knows there are more mergers and acquisitions on the horizon.”
The CredAbility group had grown rapidly during the recession and also became well known for its Consumer Distress Index research, which identified Orlando as the most financially distressed city in the country. The ranking was based on high unemployment, foreclosure and consumer debt delinquency rates.
Like many agencies, however, CredAbility’s business took a hit on every front – credit, housing and pre-bankruptcy counseling – as credit-card and mortgage delinquencies, unemployment filings and personal bankruptcies fell during the economic recovery.”
“For the most part, across the entire credit counseling industry, volumes are down for credit counseling; and as agencies are impacted by this, some have had no choice but to merge,” InCharge’s president Etta Money said. “InCharge has experienced these declines as well and has been forced to reduce staff to coincide with the lower overall requests for service.”
If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.
Before You Sign Anything: Run any debt relief contract through the free Contract Decoder to spot hidden fees and unfair terms. Check the company’s complaint history with the Scam-O-Meter.
Compare Your Real Options: Most debt relief companies won’t tell you about all your options — especially the ones they can’t profit from. Credit counseling has a 21-27% completion rate. Settlement resolves about 1% of enrolled debts fully. Bankruptcy has a 95% discharge rate — and protects your retirement. Take the Find Your Path quiz for a recommendation based on your actual numbers.
I hate to see this. CredAbility and CCCS 4 years ago were about the only honest firms trying to do mortgage modifications and foreclosure assistance. They did grow tremendously with the creation of the credit counseling and financial management requirements in bankruptcy along with 50 other firms who were into it. I never did think they were very effective at debt resolution in a payment plan. Everyone who I sent there came back saying it was cheaper to do a chapter 13 bankruptcy. Their repayment plans just never seemed to be as effective as what you could probably accomplish on your own with discounting the principal and making payments.