Counselors consolidate themselves
Debt consolidation? Try debt counseling consolidation.
For the second time in less than three years, Consumer Credit Counseling Services of the Inland Northwest has merged into a larger organization. The change, announced earlier this month, will improve client service and protect jobs in the Spokane office, says President Mark Harnishfeger.
The Spokane service, which has provided debt management services, counseling and education to thousands of area residents since 1979, will keep its name. But the new mother ship is Money Management International, the largest nonprofit, full-service credit counseling organization in the United States. MMI employs 950 at its Houston headquarters and has 17 outlying Consumer Credit Counseling offices, including Spokane’s. In 2004, MMI counseled 150,000 consumers who repaid $423 million in debt.
The Spokane office combined in November 2002 with Consumer Credit Counseling operations in Washington, D.C., and Fort Worth, Texas, to create Credit Counseling Network. But Harnishfeger says the consolidation did not stop the slow erosion in the number of area clients served, to about 1,200 today.
“Competitors, obviously, kept entering the market,” he says, with each taking a little chunk of business.
The pressures took their toll on operations large and small.
Cate Williams is the MMI vice president for financial literacy and the former head of the Credit Counseling Service in Chicago, which merged with MMI in December 2001. There was no other way to contain costs while keeping up with the demand for new services, she says.
“I found myself constantly chasing the technology,” Williams says.
MMI has the resources and the products to better serve consumers, she says.
Paul Richard, executive director of the San Diego-based Institute of Consumer Finance and Education, says Consumer Credit Counseling offices around the country have been under financial pressure since court rulings in the 1990s broke the monopoly many had on the debt management services that were their bread and butter.
Debt or credit managers accept client payments and redistribute the money to creditors in return for a percentage. Many creditors who had been willing to share more than 10 percent of the debt before the courts stepped in cut that split by half, putting a squeeze on operations, he says.
“There was no way any agencies could survive unless they cut costs or merged,” Richard says, adding that MMI was one of the first agencies to see the need for consolidation. The service has a good reputation, he adds, although it recently ran afoul of California authorities over fee levels.
Earlier this year, for example, a Bankruptcy Court trustee in Maryland transferred to MMI about 50,000 debt-management plans opened by AmeriDebt, which was sued in 2003 by the Federal Trade Commission for allegedly misrepresenting its services.
Harnishfeger says MMI’s good name will work to its advantage as the Oct. 17 implementation of the new bankruptcy law approaches.
The U.S. Trustee will soon decide which credit-counseling agencies will be certified to apply a means test that will sort debtors who can repay at least a portion of what they owe from those hopelessly under water.
The agencies will also provide the 90 minutes of counseling each filer must undergo.
“They’re making the bar high,” Harnishfeger says. “A lot of the requirements they’re making are going to wipe out a lot of debt management mills.”
Because most Spokane-area residents who file bankruptcy earn less than the median income for Washington, the law’s effect is expected to be minimal.
But the national response could affect local employment, Harnishfeger says.
Much of the additional counseling the law requires will be done over the Internet or by telephone. The Spokane service’s office at 1912 N. Division has room for a call center should more counselors be needed. MMI services are already available 24/7 in English and Spanish. Difficult as it may be to believe, Harnishfeger says he can hire bilingual help more easily in Spokane than could the Fort Worth office.
Consumer Credit Counseling now employs 12. Harnishfeger says some layoffs would have been unavoidable next year had the merger not occurred.
“For the consumer, it’s going to be much better. For our association, it’s going to be much better,” Harnishfeger says.