Over the past couple of weeks I’ve noticed a wave of information appearing on the web about the decrease in demand for credit counseling services. The reason given seems to be “consumer fatigue.”
The peak client numbers that nonprofit consumer credit counselors saw in 2009 appear to be slowly falling. NFCC member agencies in the Ninth District began to see a gradual decrease in client volume in 2010. For example, The Village Family Service Center saw a slight drop-off beginning in June and July. As of September, Sheri Ekdom projected calendar year 2010 would show a 7 to 8 percent decrease in client volume compared to 2009 numbers.
While the decline could be read as a sign that the economy is improving, counselors attribute it to other factors. According to Tom Jacobson of CCCS of Montana, the decline is due in part to competition from dubious debt-settlement companies and in part to recent efforts by credit card companies to circumvent nonprofit counseling agencies. Some credit card issuers have launched in-house credit counseling operations that negotiate directly with selected debtors. The practice has raised concern among some consumer advocates, because credit card companies may have an interest in seeing their own claims paid first, even though that might not be what’s best for their customers’ overall financial situations.
Another factor in the declining client numbers, according to multiple counselors in the Ninth District, is consumer fatigue or economic fatigue.
“I don’t have scientific proof of this, but I think there are people who are getting tired and maybe making a choice of not doing anything,” says Sheri Ekdom. “We’ve worked with some people on their housing situations for five, six, seven months, and they’re not getting anywhere with the lender. There’s a sense of ‘Why should I continue?’ ” –
You’ve got to shake your head at the credit counseling attributed statement, “…recent efforts by credit card companies to circumvent nonprofit counseling agencies.” How is it possible for creditors to circumvent their own relationship with their own customers?
Credit card companies offer internal hardship programs and term reductions to their consumers they feel it is appropriate to do so for. That’s not a mystery or inappropriate in my book.
A news interview in Minnesota also presented the “consumer fatigue” talking point.
Jim Kroening, of the Stillwater-based non-profit Family Means says their office has seen a 30 percent drop, and he worries that people are turning to the myriad for-profit, debt-elimination companies that advertise on late night TV.
What continues to strike me as just plain odd or misdirected is the opinion by credit counseling groups and apparently the National Foundation for Credit Counseling (NFCC) that the downturn in demand is due to debt settlement companies or the housing situation.
I’ve covered the trends on this topic for a while now and have covered the underlying issues in depth.
I still struggle to wonder why the credit counseling industry can’t stop focussing on debt settlement as the reason for their ills and deal with the true underlying problem, more and more consumers can’t afford creditor term dictated debt management plans. It’s not a mystery.
And as far as decreased demand, it’s been a few years since consumers loaded up on debt and as more time passes the demand for relief services will continue to fall.
It would be nice to see credit counseling deal with the real underlying issues here then try to point blame at debt settlement today or creditor hardship programs.
The real problem is credit counseling groups only offer creditor dictated terms to consumers in trouble. The terms are not sufficient to meet current consumer needs. Creditors also control the services credit counseling groups can offer by holding the withdraw of fairshare funding over their head. Now that’s an issue to deal with, not “consumer fatigue.”
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